How to Save Money When Buying or Make More When Selling a Home
In your professional capacity and perhaps also in your private life, you may be closely involved with financial and commodity markets. Trading in stocks, bonds or futures is part of your daily routine. Occasionally you probably have to deal with real estate as well though – if you e.g. want to purchase an apartment or a house, or if own a home you wish to sell.
The people who took this photograph probably want to sell… how do we know? Read on…
Photo credit: vantagedesigngroup.com
Moody’s & Reserve Bank of Australia Warn of Increasing Mortgage Arrears and Looming Apartment Defaults
Last Wednesday Moody’s reported that mortgage arrears continue to rise across Australia, particularly in the mining states of WA & NT:
Moody’s report notes that mortgage performance deteriorated in all eight Australian states and territories over the year to 31 May 2016, reaching 1.50% from 1.34% at 31 May 2015. And, in Western Australia, Tasmania and the Northern Territory, the 30+ delinquency rate climbed to the highest levels since Moody’s records began in 2005, while in South Australia, the delinquency rate was just 0.1 percentage point below the state’s record-high reached in April 2013.
Western Australia fared the worst in terms of mortgage performance over the year to 31 May 2016, with the 30+ delinquency rate increasing by 0.69 percentage points to 2.33%. This measure has been on the rise in the state since 2014, following the end of the mining boom. Relatively poorer economic and housing market conditions in Western Australia contributed to the historically high level of mortgage delinquencies.
In Australian regions dependent on the mining boom, delinquencies and defaults have risen sharply. It seems highly likely that the bust is eventually going to spread to the large Eastern and Southern coastal cities given the degree of overvaluation based on fundamental criteria
Australian property bubble on a scale like no other
Yesterday Citi produced a new index which pinned the Australian property bubble at 16 year highs:
Bubble trouble. Whether we label them bubbles, the Australian economy has experienced a series of developments that potentially could have the economy lurching from boom to bust and back. In recent years these have included:
- the record run up in commodity prices and subsequent correction;
- the associated boom in mining investment and current reversal;
- record low bond yields;
- the boom in housing construction, specifically apartments, that was spurred by the low interest rates.
Housing indicators in the bubble meter are at record highs but interest rates remain at record lows. Typically monetary policy is well into tightening mode at this stage in the housing cycle. A destabilizing housing burst (both in activity and prices) is a clear risk, particularly the longer the upswing runs.
Unknowable Degrees of Bubble Insanity
Back in February, we brought you an update on the truly insane real estate bubble in Australia (see: “Australia’s Housing Bubble – In the Grip of Insanity” for details) in the wake of Jonathan Tepper of Variant Perception reporting on an eye-opening fact-finding tour in Sydney.
This rotting shack in Sydney and its tiny plot of land sold for nearly $1 million in May of 2014 – more than two years ago. Since then, house prices in Australia have increased even further. Yes, it is an insane bubble, no doubt about it.
Photo credit: Attila Szilvasi
Medical vs. Financial Engineering
I broke my elbow a month ago, pretty badly as I was told. The surgeon screwed the pieces back together, using a steel alloy bracket and six screws. Two hours later, I left the hospital with no cast, a bandage (just to cover a very ugly scar), a prescription for painkillers and therapy started a week later.
This isn’t Ramsey’s elbow specifically, but a random post surgery elbow collection from the inter-webs, to illustrate how it’s done. The contraption in the lower right-hand corner is generally used to hold an elbow together after a complicated fracture. As you can see from the x-rays, this is then complemented with additional thingamabobs as required.
Image source: eortopedi.com
First, a few quick words on Brexit. Being the always positive and optimistic person that I am (big grin), I see one very positive outcome of Brexit – it is a revolution without bloodshed.
The peasants are getting restless…
Illustration via squadron.com
Is it Time to Buy Income-Producing Real Estate?
No, No, No. Much to the dismay of my real estate buddies, who are complaining about how high prices while watching the cash flow of their portfolios bursting at the seams from a few good years of rent increases, the answer is no.
REIT cap rates (as of mid 2015, they have declined further since then)
A Sudden Turn for the Worse
Freddie Mac posted a loss of $354 million this quarter, versus a $2.16 billion gain the previous quarter. Fannie Mae did slightly better with net earnings of $1.1 billion, which were still substantially down from $2.5 billion the previous quarter though.
Freddie Mac HQ – a strange time for posting losses
Photo via nytstyle.com
Tide of Money
BALTIMORE – Another indecisive week in the markets. China did not blow up. Energy company debt did not melt down. And investors did not panic in the face of a slowing world economy, falling corporate earnings, and central bank absurdities.
This morning, all is well. But nothing fails like success. Throw a lot of money at any market, and you are asking for trouble. Today, readers are urged to check their real estate holdings.
Vancouver at dusk…
Photo via fourseasons.com
A Mountain of Debt – But at Least We Have an iPhone
Whenever I encounter someone from the younger generation (40 years or younger), I make it a point to apologize for leaving them a country in far worse shape than the one I enjoyed. Surprisingly, none of them believe that apologies are necessary, as most have no clue what I am talking about.
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