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Key Pillar Of Housing "Recovery" Cracks As Private Equity Becomes Marginal Seller
With mortgage applications down around 60% from their peak in April, the last best hope for sustained "recovery" in housing 'was' the cash-only bid from private equity and hedge capital in the REO-to-rent or flip-dat-house trades. As we have noted previously, that last pillar was starting to falter and as Bloomberg reports, it seems is now in full crack mode as Carlyle Group switches from marginal buyer to marginal seller in its $2.3 billion real estate funds. "Our capital was useful at the front edge of the recovery," the firm notes - implying the big gains are over as rent growth fades (as employment and income growth slows). Crucially, they add, "investors really want the new Class A properties so we’re selling into that demand." We assume that by "investors" they mean greater-fool bag-holders.
Carlyle Group LP, the private-equity firm with more than a third of its $2.3 billion U.S. real estate fund in apartments, is reducing holdings of multifamily housing as rent growth slows from a post-recession surge.
The company is considering apartment sales as rising construction reduces multifamily shortages and price gains for rental properties make them less attractive for private-equity firms that seek returns of 20 percent or more.
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“Our capital was useful at the front edge of the recovery.” [in other words, we sparked the bubble and now we want out]
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Apartment-rent growth is slowing as the U.S. homebuying market rebounds and a wave of multifamily building adds to supply. In the third quarter, tenants on average paid 3 percent more than a year earlier after landlord concessions, down from 3.9 percent annual growth in effective rents in 2012
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“This remains well below what one would usually expect given such a low national vacancy rate,” Ryan Severino, senior economist at Reis, said in the report. “This reflects continued modest employment and income growth.”
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“Investors really want the new Class A properties so we’re selling into that demand,” Stuckey said.
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“Our basic view is we’re in a low-growth environment,”
So it seems, just as with Private Equity using the exuberance to IPO its corporate holdings, they are seeing the opportunity to sell into this strength in real estate - hardly a sign that the housing recovery hopes are sustainable (especially in the new echo bubbles)...
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oops... there goes the "housing recovery"
lol
Try to recover from this-
National Health Care (Obamacare) Unfunded liabilities 9,291,606,027,048.89 Trillion dollars!
The nationalization of everything (socialization of private losses - which has been happening for decades) will be "completely unforessen".
Expecially if your name is Liesman.
this whole thing started with greenspan raising rates 9 consecutive times in hopes of cooling
down the east and west coast housing prices on fire. he succeeded in the sense he stopped
the realestate market for a couple years but the process turned the center of the country
into a burned out cinder.
the over all job of the fed is to enrich the shareholders of the fed and its franchise banks
by creating boom and bust cycles whereby they can capture all the assets in america and
enslave every free citizen to debt.BUT they bit off more they can process and took in
every home in america, they are working through the glut of their creative destruction
on the backs of the tax payer but they have killed the host, got too greedy and now they
have turned the whole paper system into a worthless kindling pile.
I have made many comments regarding my bullishness on US real estate from 2009-2011, and I would have to agree with the idea that most of the easy money has already been made in the subsequent "recovery". However, I think the US real estate market (at least the residential market, generally) is far from "Bubble 2.0" as ZH likes to call it.
The US still has some of the cheapest residential real estate in the world, and few people seem to understand or recognize this fact. Even Spain, which is still attempting to recover from the bursting of its bubble of epic proportions, would look pricey compared to Florida real estate when the Euro/Dollar exchange is factored in, yet if you look at incomes, unemployment and other factors, I would put money in Florida property long before I would Spain. Elsewhere in the world, you still have to go to Africa or other far flung nations to find homes in reasonably safe neighborhoods for under $75 psf like they are selling for in the US.
Sure, some of the private equity guys will start to cash out, and no, I don't think it is clear sailing for US real estate from here. Gains will probably level off, maybe even falter in some markets, but, barring a complete and permanent shutdown of the US government, and/or its banking system, and/or any one of a myriad of unforeseen macro risks, the current state of the US real estate market is nowhere near a bubble (just look at Canada, now there's a real estate bubble).
Class 'A' properties? Are they talking about RV's?
You can get Stuckey. Oh, how you can get Stuckey!
lol
Investors really want the new "Class A" properties? Pull the other one
buy "class A" now or be priced out forever
the deflationary collapse is in full swing
Funny as unaffordable overpriced houses are deemed desirable and a measure of "recovery".
House prices have to come well down from current levels.
Talking cash prices, out of savings from under the mattress,
no credit, no banks involved. 3 years worth of earnings
and we are back to normal desirable levels.
My neighbor was conned by the ads and seminars to become a "Millionaire Landlord" and jumped in buying three rental houses. Things went swell last year but now that that area is 50% rental houses plus, thousands of new, "3-month-free-rent-apartmets" were built, rent prices are plunging and all his tenants handed him ultimatums, lower the rent or they move.
So he is stuck in a falling market...house prices tumbling as every Landlord now wants out of the Losses, as well as crumbling rent prices. This wil spread to the many areas of the nation where "investors" bought hundreds of units for rental property income.
Nobody can say tey did not see this coming as Huge as the Housing Bubble still is. Massive misallocation of assets.
Oh well.
Class A features updated, quality construction.
But this one is even better (by an order of magnitude):
http://cnsnews.com/news/article/eric-scheiner/open-business-govt-erect-98670-outhouse
This is how asset prices can and do go down in a money printing environment.
Now, why is that so fucking hard for people to understand?
Because most people coiuldn't define what an asset or money is in the first place LOL!
In my lifetime 5 oz of gold will buy a decent home, but the property taxes will be a bitch.
>> the property taxes will be a bitch.
You've got to work the system. My property taxes are $700 a year. My next door neighbor is right at $10K. Of course $10K is less of an issue for him than $700 is for me, but we both enjoy the same view, the same municipal services.
do you live in California?
>> do you live in California?
Florida
Not sure why folks down-arrowed you, jealous?
I'm paying more than $700/year, though one of my neighbors, who has a fraction of the land that I have, is shelling out in that $10k range (nearly 5x more). McMansions have a way of attracting tax collectors... (they don't like approaching trailers with dogs)
My land is classed as Ag land, so my taxes are lowered: and this is how it should- my property is not "investment" property that'll elicit future govt spending to supply infrastructure to/for.
Hoping that you don't piss off your neighbor by flying your big NASCAR flag. </sarc>
There's never been a better time to buy. Move to Florida, move to the Hudson Valley, move to Jersey, move to Chicago, just buy you feckin slave, buy buy buy.
Yeah, move to Florida where flood insurance increases are smacking home prices. There are going to be bargain sales here as folks will not be able to make the flood insurance payments. Already happening. But, pay cash and self insure (if you dare) if you can.
>> pay cash and self insure (if you dare) if you can.
That's what I do. I was in that waterfront/close to water front category several years ago. After 20+ years of paying premiums and making zero claims I was cancelled, like many others. I was told to go to the insurance pool to get ass raped. Fortunately I owned my place free and clear and was able to tell them to stick it where the sun don't shine. But I was a little nervous as there had been four hurricanes in the recent past. I was able to dump the place in the midst of the RE market free fall, another benefit of owning the place free and clear.
Funny thing about self insuring, you take a little more time choosing a property. I'm well inland now so hopefully my wind issues will be mitigated somewhat. And I chose my location based on drainage of my lot, and also of the surrounding area. Subsidized flood insurance enable people to buy and build in areas they never would if the risk was totally theirs.
These assholes have just figured out that renting to lowlife deadbeats is not the path to EZ riches.
That's cause no one has a freakin job...
Hope and Change, bitchez!!!!!!!
DaddyO
At least the Repubicans have there best men on it right now... oh, wait they are still stuck on birth certificates.
What's with the lowlife deadbeats smear??? The Rentier Class are the lowest of all life. They add nothing of value, Most likely gained their assets through our .gov's inflationary theft. If some tenent fucks up their property, fuck 'em. The system through the working, middle and lower classes overboard 30 years ago. The serfs are getting pissed, and when all opportunity is crushed I can't blame them for having a sdense of entitlement. If the system was equitable they could work and provide for themselves. In the abcence of that equity you get the Free Shit Army. Cause, meet effect.
These assholes have just figured out that renting to lowlife deadbeats is not the path to EZ riches.
well DUH !....
the entire "idea" (more like idiots) of "investing" in homes is retwarded....
a home is for shelter.... (i.e. house vacant = 100% vacancy) if any of these bright "smart money" gurus would figure out that any apartment is a far better deal than many homes (as a real investment) given the fact that operating expenses are distributed amongst the # of units in the same location (as opposed to numerous SINGLE unit dwelings distributed in various locations)
so for example a 1 unit vacancy in a 10 unit apartment is a 10% vacancy as opposed to the 100% vacancy refered to above....
why such a simple principle could not be figured out back in the housing bubble days, or worse in today's environment, has proven that the policies of these morons (aka "economists" at the fed who gave away money) and in the process allowed even bigger morons to go into this house buying binge...... is the PROOF that easy money is NOT the solution to the current idiocy....
(i know, in addition...... there is that little detail that you cannot fix debt excess with... er.. more debt....)
anyway....
it is not necessary the lowlife renters..... it is the easy money poicies (and lack of understanding of basic real estate investment principles) that yield the .... "oops housing recovery is dead...."
frankly, if you input real property taxes into the equation, (knowing that counties and cities are desperate for cash and will use any reason to UP your taxes).... there is NO VALID FINANCIAL REASON to buy ANY real estate today.... renting.... is a better choice.... (in selected instances.....)
other option.... as i said earlier...... you are better off buying a large trailer place it on farmland (that you own) and then work the land with a cash crop that is in demand....
low property taxes.....
quality of life
lots more fun
excercise to keep you healthy......
House has been on the market for 14 months. 3 buyers have all collapsed for different reasons; all lack of funds. We have dropped the price from 190k to 150k. We will lose at the current price around 25-35K. Luckily we have family support to mitigate that, but we must sell the house which is next to impossible. I'm giving it another 6 mo. After that I'll rent the fucker, but this is ridiculous at this point. Wish me luck. My life is awesome otherwise, but this house is fucking us up. There is no recovery. There is no more middle class.
good luck indeed.....
rent it....
then buy a large trailer, (place it in some farmland you would own and grow crops) *if you can
Have the farmland, a couple dwellings and prepping for trailers as that will be the only affordable dwelling for many as opposed to shanty towns. Some farm fresh produce is included in the rent in exchange for farm chores. Trying to be fair.
2 tennents of mine lost their jobs past 2 month , had the server go out to them and serve them, one was able to pay the back rent , the other just moved out while crying. Both are honest hard working single parents. This fucker in white house will be ripped apart by realilty one day and i hope i get to see it.
offer work in exchange for rent. do you own a business?
i am just a DBA for side things, i work full time for a mega corp.
" This fucker in white house will be ripped apart by realilty one day and i hope i get to see it. "
And just what good do you expect this to do?
Not to defend anyone in politics, but...
It's all been a big bubble-up for DECADES. During Clinton's administration all sorts of feel-good numbers got created, making things LOOK legit: and keep in mind that NAFTA -the "pro business" legislation- got passed, which is one large piece of the puzzle that helped set up this final collapse.
The apex was 1971. Do some research on the importance of that year: THREE VERY BIG THINGS, THINGS THAT SPELLED EVERYTHING OUT, OCCURRED THAT YEAR. Or, you can continue to think, in a Party-Pussy way, that this is all some sort of new stuff that is only the result of some current "administration."
Those folks who departed crying, well, yeah, it SUCKS. But the reality is that they were NOT prepared to continue to pay you rent. Either one believe that this kind of thing didn't ever happen before the current administration, or one is being awfully selective (perhaps because now that one is directly affected one is but NOW seeing what happens). I got out of a mortgage after I'd realized that the future wasn't going to be what we'd been sold: this was BEFORE the current administration - the Bush era, and while it happened THEN, I wasn't blaming it (I put on my adult-thinking-cap and realized that it's the fucking System).
Again, not being heartless, but it's going to get butt-ugly because we set it all up so that it has no other way to go but this way: anyone thinking that the perpetual-growth meme could go on forever should be banned from being able to influence anyone else, on anything!
750 MILLION people in India live on $0.50/day. Though I've never been there I HAVE been to a pretty impoverished location (well, other than East Tennessee)- Manila: my wife is from Manila; I've been there, and not as a tourist.
And just what good do you expect this to do?
I wanna see how the propaganda machine spins it. I agree with what you wrote, but the propaganda layers are so much more now then back in the 1970's. BS flies in nanoseconds
There's a difference between being an observer and in being an actor. Your posting was more than that of being an observer: you were advocating an action based on events. Don't get me wrong, I TOTALLY sympathize with those who suffer, but sympathizing (and or lashing out with verbal tirades, often sinking to the depths of name-calling) does nothing for those suffering (and most likely there's energy loss, a negative on top of an already negative).
I don't pretend to know, or to otherwise have an inside track in to, the minds of all those having high-level influences, but what I DO KNOW is that perpetual growth on a finite planet is NOT possible and, as much, neither is any growth-based human "economics" system able to be sustainable. I only wish to call folks out for a discussion of this FUNDAMENTAL: any other "discussion" that skirts around this is likely steered by deception and ignorance- not traits that I'd in any way advocate for basing any "solution" (other than purely an individual one*) on, and when it could mean all of humanity? (those war drums have a LOT behind them)
* I believe that every individual has the "right" to be as deceptive as she/he wishes to be, but deception at an organizational level should not be charted (legitimized); and, sadly, as long as there's individuals IN an organization/group there WILL be deception, deception that, as we've seen, can be multiplied to very large degrees. And this is the reason why I tend to stay away from groups (govts included)...
Anyway, thank you for taking the time to mull over what I'd written, and for you in interpreting as I hoped it would be, for constructive purposes.
Great post!! Another piece of anecdotal evidence.....I used to receive countless offers to roll existing credit card balance over to a new card company at zero percent. I have not received one of these in months. Credit is drying up left, right and center.
Good Luck, BTW. I sold my house in May and it was a pain in the ass for the reasons you listed.
Apparantly you're not charing enough.
Crappy tear downs and beach shacks are going in California for 900k - 1000k, moslty cash offers.
Bidding wars on all of them.
People have no regard for price or work to be done. They just want it and buy it.
Inventory is so low that when a house comes up it's gone within the week.
So we're living in to different worlds. Yours sounds like Rust belt.
Re: So we're living in to different worlds.
There's been two separate economies for decades now. As long as the trash-class keeps blaming the wrong people for their problems the top 10-20% will be doin' real REAL fine for long long time.
Where is it? Ill buy it.
Everywhere I look, prices are up 40% from 2-3 years ago and not going down.
Look at Detroit.
You don't have to look at Detroit.
I see this often in ZH Real Estate threads. People talking about impossible to sell house and collapsing rents. Then someone pipes up about gazillion % price increases on houses and pretty much always "in california".
Well, I have seen some houses cutting list price in California so it ain't all of California seeing these price jacks.
Then the reply will be "well, I see price raises in California. You must live in the <<rust belt, central Mississippi, Appalachia or anywhere they think must be the tiny tiny horrible area of the US that isn't booming>>".
Sorry, I see what I see and I get around. It's tiny tiny tiny places in California that get the price rises. The rest of the stories of collapse are the American normal. It's 99% to 1%, and the 99% are in freefall.
I disagree with the premise regarding the rust belt... The reality is that most of the other areas of the country never had the same build-up and, thus, don't have the same collapse... I'd say our prices are probably up 2%/yr for the last few years for "middle of the road" houses (after never having a real decline of any sort, even in 08). Just kinda trudging along... no one is getting rich, no one is loosing their asses except for the idiots that have built mcmansions @ 6x+ the avg. annual household income.
Check the Boston area; check Seattle. Check any city in Oregon where meth is not the main industry. My sister in law lives in a downscale subdivision in south Sacramento, and her house is up 40% in 3 years.
You missed the point. The areas of price jack are the exception, not the norm. Any city in Oregon? Portland and a university town. That's all there is.
The key here is not to look at listings. Listings mean nothing. Get closings and also get all the extra particulars. I watched a house for sale outside Denver sit listed for 250K. The listing was cut to 220K. Then 200K. Then 180K. And you know what? That place had showings up the kazoo. They probably did 80 showings.
They sold for "175K", but that was the number the real estate agent booked for his commission. They tossed in a boat and four snowmobiles and 5 years of house warranty.
I saw a similar thing outside Memphis (home of FedEx). Started at 289K. Dropped over the course of a year to 190K. Then the owner started adding things to the listing like a riding mower, a 2009 Infiniti, carpets the buyer's choice of color. Mostly this stuff happens to avoid a price drop that the agent freaks about (cuz it kills the rest of his inventory and he gets a commission on the number before those things are thrown in).
There is no recovery.
>> prices are up 40% from 2-3 years ago
That's what I'm seeing in the Florida locations I typically shop. When we bailed out of our upscale real estate three years ago we relocated to a minimalist shack way out in the sticks (I used the place as a storage unit and a place to come back to when travels were over. It worked like a champ in that regard). Anyway, a little over a year ago I decided we should upgrade our digs so I bought another fixer upper with nicer property closer to town. I'm really thankful I made the move when I did. I paid $58K for 1,800 sq ft on five cleared acres, fenced, cross fenced, with a 1,200 sq ft pole barn. I've got about $90 in it now but it's totally renovated. It was a short sale going into repo. I still shop all the time but I'm not seeing any more of those kinds of deals in our area.
I'm sure you've heard this, and it's not a pleasure to say it, but: drop the price.
Buyers don't care what you paid, how much you owe, how much you will lose, etc. They are looking for the best deal-period.
If 5 houses are for sale but there are only 3 buyers, then 2 sellers will be left holding the bag as prices drop further. Don't be one of them.
I bought my house 20 years ago from a realtor who kept lowering his price, but only after the market had dropped. The house was on the market for 18 months - 18 months of payments, taxes, insurance and exposure. This realtor/owner bought the house as an investment because "California real estate only goes up". He refused to believe the market was droping; everyone was simply trying to cheat him. He (I am not saying you) was so unreasonable that our realtor didn't even show us the house-even though the realtor/owner worked in the same office. We closed 7 days before the bank would have seized the property.
The agent will fight you because price slashes kill his inventory.
Fuck him. Slash and get the fuck out and NEVER EVER get into that bullshit, filled-with-liars "residential housing" industy again in any way.
Slash, flee and try for a farm. Fuck agents. They will tell you to throw $50,000 of gold into the deal just to keep the price of houses -- and his commission -- up.
If at all possible, just sell it, at any price. Free yourself now. And move on.
No need to sell when you are underwater already and can just give the bank (American taxpayer) back it's house... eventually.
There's also a possibility that the mortgage collectors will stop coming around. In this case would you be OK with residing in your home until you expire?
It's pretty simple: if it's where you want to be then do whatever to stay there; if it's NOT, then do everything you can to get out of there!
this post doesn't make sense to me, they are saying the home buying market is strong and so they are dumping some multifamily rentals and ZH is saying it doesn't bode well for the housing market??
Well, the guy trying to sell something is telling you-the prospective buyer-that something is cheap.
Ask one of the elders from your village to explain why the city guy is offering you such a good deal.
Priceless! (way to put it)
At the end of the day, the owner needs to make a payment or collect the rent, and you can't make a house payment/rent without a job.
So, all these oZombies paying cash for houses "because they're cheap" will lose money unless these houses are in an area with economic activity.
CA - barely; AZ - No; LV - heck no; FL - not much
If it's one's personal residence then one doesn't gain or lose until they sell.
One of my siblings, who, on the side has done real estate (mostly commercial) told me that housing prices would never come down bought in AZ (a "winter" home), did so around the peak of the bubble if I'm remembering correctly. I just continued to rent (after selling at the top of the bubble) until prices had sufficiently dropped to the point I could afford viable property/land (and I did so at near-bottom interest rates- rather use cheap money than to liquidate, an extra hedge in case mortgage collectors loose their way to my place on day). Sure glad I didn't get a degree in "business" like he did... P.S. My property values have inched up (and taxes are, after briefly dropping, back to what I was initially paying when I bought the place): but I really don't care what someone else says that it's "worth" (that is, as long as that doesn't trigger more taxes), I'll decide that, thank you very much!
Let's face it, America is broke.
If America were a man he would be sleeping under a bridge on the Hudson River sipping from a bottle of meths and enjoying the furlough from his job at the DMV.
If there was ever a hard and fast rule this is it: Never buy anything from Carlyle and their ilk. NEVER EVER NEVER NEVER NEVER EVER NEVER!
Something about needing a job producing useful things being required to actually wanting a home in the first place has always made sense to me.
With 30 % of the mortgage market shut out thanks to the closing of .gov, things will get scary fairly quickly.
But Mellish, all the realtors that I've talked to say there's never been a better time to buy.
Someone should ask CNBC if it is still a "second derivative world"
These analysts are getting it all wrong. People set for themselves a mimimum living condition at which they will feel mostly comfortable (considering safety, demographics, noise, proximity to work) and then after that the only considerations become PRICE.
Now this may not apply to NYC of SF from what I understand about those places, but renters know (even if they don't know it) that their money is being burned away on rent, and dont fancy forking it over to a landlord every month. People are looking for low COSTS in this wage-lessening, job-scarce environment.
You can't save when 50% of your income is going towards rent as soon as you get your already taxed paycheck and people know this. All the McMansion walk-awayers have already moved into apartments (thinking they were getting a good deal after paying $4,000/mo. mortgages that half that amount in rent gave them breathing room; idiots) and jacked the market up.
The market has already been saturated and new supply is constantly getting ready to smack it's way into the pipeline as soon as units are finished. Let a couple months go by to unkink this time-lag hose and see how things are then.
Real Estate is the molasses of all financial markets. The rent market may be a little bit more fluid, but people still have leases that last a certain length of time and can't just up and move as is commonly believed, so it's nowhere near liquid, and consider the time-lag, as always.
How fucked up it would be if Carlyle and the like PE firms own the networks that pimp house flipping shows?
That's some tinfoil-penetrating thoughts right there.