Implode-Explode Heavy Industries news feed http://implode-explode.com/ Tracking the many faces of the global credit implosion. en-us iehi-feed-60560 Tue, 30 Aug 2016 18:35:34 GMT ‘The Market Is Saturated': Brooklyn's Rental Boom May Turn Into a Glut http://implode-explode.com/viewnews/2016-08-30_TheMarketIsSaturatedBrooklynsRentalBoomMayTurnIntoaGlut.html There are 19 residential towers either under construction or recently completed along the 10-block section of Flatbush stretching from Barclays Center north to Myrtle Avenue. When all of them are finished, they will have added more than 6,500 apartments -- overwhelmingly rentals -- to New York City's housing stock. Another four buildings on Myrtle Avenue will add almost 1,000 more units.

There are so many new apartments in the neighborhood -- roughly one-fifth of all rental units expected to become available in the city in 2016 and 2017, according to Nancy Packes Data Services, a research firm -- that the Brooklyn rental market seems poised to zoom right past boom, to glut.

"The market is saturated," said Sofia Estevez, executive vice president at the developer TF Cornerstone, which will begin offering apartments in a 25-story, 714-unit rental building at 33 Bond Street next spring. "I think it'll take a couple years to stabilize."

And just as overbuilding along Billionaires' Row around 57th Street in Manhattan has caused prices to soften in the highest-end market, the construction boom in this stretch of Brooklyn has prompted landlords to strike deals to fill their buildings, which dwarf the surrounding brownstones, rowhouses and tenements.

At 7 DeKalb, a new 23-story tower atop the City Point mall complex, the landlord is offering two months of free rent with a 14-month lease, and use of the building's fitness center and other amenities for a year without charge. That means a one-bedroom, one-bathroom place can be had for $3,428 a month; a two-bedroom, two-bath apartment goes for $5,057.

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iehi-feed-60558 Tue, 30 Aug 2016 14:38:59 GMT US home prices rise in June at slowest pace in 10 months http://implode-explode.com/viewnews/2016-08-30_UShomepricesriseinJuneatslowestpacein10months.html iehi-feed-60553 Tue, 30 Aug 2016 05:18:24 GMT "I've Never Seen Anything Like This Before" - The Housing Markets In The Hamptons, Aspen And Miami Are All Crashing http://implode-explode.com/viewnews/2016-08-30_IveNeverSeenAnythingLikeThisBeforeTheHousingMarketsInTheHamptons.html [Why the downturn?] Ask a dozen market watchers why, and you'll get a dozen answers. Uncertainty around the presidential election. Fear of Trump. Fear of Clinton. Growing trade imbalances with China. Brexit. Roller-coaster oil prices. Zika. Wobbling economies in South America. The list goes on.

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"People are worried about all kinds of stuff these days," says longtime Aspen broker Bob Ritchie. "I've never seen anything like this before."

The speed of the collapse has been stunning... This year ... "a slowdown in January turned into a free fall." Sales volume in Pitkin County is down 42%, according to data compiled by Land Title Guarantee Co.

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As noted here over the years, In the case of Miami, like in other most other coastal markets such as New York and Los Angeles, the housing boom was heavily boosted by foreign buyers, who used US luxury real estate as their new form of anonymous "offshore bank accounts" courtesy of the NAR's exemption from Anti-Money Laundering Provisions. However, after the recent drops in commodity prices and the spike in the USD, they have scaled back their purchases.

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iehi-feed-60538 Sat, 27 Aug 2016 03:50:30 GMT The Global Real Estate Bubble Is OFFICIALY Bursting http://implode-explode.com/viewnews/2016-08-26_TheGlobalRealEstateBubbleIsOFFICIALYBursting.html iehi-feed-60530 Fri, 26 Aug 2016 14:56:01 GMT Why are America's suburbs getting poorer? http://implode-explode.com/viewnews/2016-08-26_WhyareAmericassuburbsgettingpoorer.html Atlanta has seen a big rise in suburban poverty. Between 2000 and 2012 the rate increased by 159% in Atlanta's suburbs. But the region is not alone. For instance, in Denver the rate rose by 131% and in Portland by 98%.

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Rents, even in the suburbs, are rising and many of the best rental homes in suburban Atlanta are owned by private equity firms. Many of these firms swooped into the market during the recession, buying up foreclosed homes and fixing them up for renters. These houses are typically well-maintained, but come with higher monthly rents and higher credit requirements.

These are standards many in the region are struggling to meet. It's forced some to take up long-term residence in local motels that don't check credit and others to move several generations of a family into one home.

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iehi-feed-60521 Thu, 25 Aug 2016 01:12:31 GMT British House-Buyers Dance With the Devil http://implode-explode.com/viewnews/2016-08-24_BritishHouseBuyersDanceWiththeDevil.html To outsiders, this property obsession seems a kind of collective madness... Brits' appetite for houses at inflated prices brings to mind former Citigroup boss Chuck Prince's infamous 2007 assertion that "as long as the music is playing [in terms of liquidity], you've got to get up and dance".

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Wavering prospective home-buyers are enticed by ultra-cheap mortgages, bolstered by the Bank of England cutting rates after the Brexit vote. So buying is still often cheaper than renting. And while falling interest rates raise big questions about company pension promises, buying a home at least gives you somewhere to live in retirement.

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Brits aren't mad, they're just trapped: prisoners of a system that conspires to keep prices high and houses in short supply. They know their government will do almost anything to prevent house prices collapsing. Buyers can already obtain loans from the government to help get on the housing ladder, a policy that will further inflate prices for those lucky enough to own property already. There are reports that Theresa May's government is preparing a fresh multi-billion pound housing stimulus -- albeit one that should support more development.

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Of course, it would be wrong not to look at the longer term. The pound's depreciation, the U.K.'s gaping current account deficit and relentlessly awful productivity say nothing good about the prospects for the economy. If Brexit leads to investment cuts, then jobs will go too. For now, though, British buyers will be compelled to continue their dance with the property market devil.

The pretend-wealth of highly-leveraged housing is all fun and games until prices crash (whether because of intrinsic exhaustion or the economy sputtering), and you're upside-down...

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iehi-feed-60516 Wed, 24 Aug 2016 18:33:03 GMT US Housing is "Comradely capitalism" (PROBLEMS STILL FESTERING; NOW NATIONALIZED) http://implode-explode.com/viewnews/2016-08-24_USHousingisComradelycapitalismPROBLEMSSTILLFESTERINGNOWNATIONALI.html The trouble is that, in America, the banks are only part of the picture. There is a huge, parallel structure that exists outside the banks and which creates almost as much credit as they do: the mortgage system. In stark contrast to the banks it is very badly capitalised (see chart 2). It is also barely profitable, largely nationalised and subject to administrative control.

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America's mortgage-finance system, with $11 trillion of debt, is probably the biggest concentration of financial risk to be found anywhere. It is still closely linked to the global financial system, with $1 trillion of mortgage debt owned abroad. It has not gone unreformed in the ten years since it set off the most severe recession of modern times. But it remains fundamentally flawed.

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The supply of mortgages in America has an air of distinctly socialist command-and-control about it. Some 65-80% of all new home loans are repackaged by organs of the state. The structure of these loans, their volume and the risks they entail are controlled not by markets but by administrative fiat.

No one is keen to make transparent the subsidies and dangers involved, the risks of which are in effect borne by taxpayers. But an analysis by The Economist suggests that the subsidy for housing debt is running at about $150 billion a year, or roughly 1% of GDP. A crisis as bad as last time would cost taxpayers 2-4% of GDP, not far off the bail-out of the banks in 2008-12.

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iehi-feed-60513 Wed, 24 Aug 2016 00:58:22 GMT U.S. new-home sales climb to best level since late 2007 http://implode-explode.com/viewnews/2016-08-23_USnewhomesalesclimbtobestlevelsincelate2007.html New-home sales jumped 12.4 percent last month to a seasonally adjusted rate of 654,000 annual units, the strongest level since October 2007, the Commerce Department said Tuesday. The demand has eclipsed the pace of construction. Just 4.3 months' supply of new homes is available on the market, down from 5.2 months a year ago.

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The improved sales of both new and existing homes has supported the broader U.S. economy, which is still hampered by a global slowdown and weak worker productivity. Existing-home sales reached a seasonally adjusted annual rate of 5.57 million in June, the best performance since early 2007.

Happy times are hear again! Or, maybe, it's pretty much a peak...

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iehi-feed-60506 Tue, 23 Aug 2016 14:13:52 GMT Goldman Says It's Too Late to Chase the Booming Real Estate Sector http://implode-explode.com/viewnews/2016-08-23_GoldmanSaysItsTooLatetoChasetheBoomingRealEstateSector.html iehi-feed-60503 Tue, 23 Aug 2016 13:42:59 GMT Not The Best Time In History To Invest In Real Estate - Part 1 | The Wall Street Examiner http://implode-explode.com/viewnews/2016-08-23_NotTheBestTimeInHistoryToInvestInRealEstatePart1TheWallStreetExa.html iehi-feed-60492 Sun, 21 Aug 2016 13:38:32 GMT Canadian Debt Slaves Pile it on http://implode-explode.com/viewnews/2016-08-21_CanadianDebtSlavesPileiton.html iehi-feed-60481 Fri, 19 Aug 2016 19:20:31 GMT Housing: China's Fading Animal Spirits http://implode-explode.com/viewnews/2016-08-19_HousingChinasFadingAnimalSpirits.html "In the past, the economic players expanded supply first and created jobs so as to create demand, but that is gone now," Lo said in a telephone interview after Friday's disappointing data. "It has to clean out the excess capacity, which means the supply-expansion model has to change."

Another way of putting it: China's build-it-and-they-will-come strategy needs to shift to one where demand, not supply, is in the drivers' seat. It's a change companies are struggling to come to terms with, leaving private investment in the doldrums.

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iehi-feed-60475 Fri, 19 Aug 2016 14:07:06 GMT Vancouver Housing Market Implodes: Average Home Price Plunges 20% In 1 Month http://implode-explode.com/viewnews/2016-08-19_VancouverHousingMarketImplodesAverageHomePricePlunges20In1Month.html Global News obtained MLS sales data from several key Metro Vancouver markets and found the number of homes sold during the first two weeks of August in Greater Vancouver dropped by 85% on average. Richmond experienced a 96% drop in the number of sales and Burnaby North fell by 95%. Vancouver's West Side, West Vancouver, and Coquitlam also took major hits.

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Zolo, a Canadian real estate brokerage, keeps track of MLS home sales in real-time and reports prices as an average rather than the "benchmark price" used by the REBGV. It currently shows a major correction underway in most Metro Vancouver markets. According to the website, the City of Vancouver currently has an average home price of $1.1 million, down 20.7% over the last 28 days and down 24.5% over the last three months. The average detached home is $2.6 million, down 7% compared to three months ago.

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iehi-feed-60465 Wed, 17 Aug 2016 16:11:55 GMT Yes, We Do Have Inflation, We Do Have Inflation Today - The Wall Street Examiner http://implode-explode.com/viewnews/2016-08-17_YesWeDoHaveInflationWeDoHaveInflationTodayTheWallStreetExaminer.html The Fed first enunciated its 2% inflation target in 2012. It focuses on the core PCE, which clearly understates actual consumer inflation using mechanics which I have recently covered here and in numerous past posts. Using a less biased measure such as the Producer Price Index for Finished Consumer Goods, inflation has run at a compound growth rate of +2.1%. That slightly exceeds the Fed's target ever since it was first established.

... [But] The Fed focuses on Core PCE, which is an even more suppressed measure. The Fed has thus been able to pretend that inflation has been well below the target of 2%. Core PCE has a compound growth rate of 1.5% since 2012. That has been one of the Fed's main reasons for keeping interest rates near zero.

Not only is there no evidence that super low interest rates stimulate consumer inflation, there is plenty of evidence that ZIRP actually suppresses consumer prices... Money printing (QE) has stimulated inflation, just not the kind that economists define as inflation. They keep their focus strictly on the CPI and PCE, which are arbitrary baskets of consumption items designed to understate actual consumer inflation... The government, economists, and the Wall Street media make no pretense of measuring monetary inflation or asset inflation. Economists and policymakers completely ignore these kinds of inflation. In fact, asset inflation isn't even called "inflation." It's called "appreciation" or "gains" or "growth." It all sounds very benign.

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iehi-feed-60462 Wed, 17 Aug 2016 14:55:24 GMT The "Housing Crisis" in San Francisco Strangles Demand http://implode-explode.com/viewnews/2016-08-17_TheHousingCrisisinSanFranciscoStranglesDemand.html For teachers, the math doesn't work out. Average teacher pay for the 2014-15 school year was $65,000. And less after taxes. But the median annual rent was $42,000 for something close to a one-bedroom apartment. After taxes and utilities, there's hardly any money left for anything else.

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These are a scary numbers for the housing market! If only 13% can buy that median home -- when in a healthier housing market, over 50% should be able to buy a median home -- who the heck is going to buy the rest of the homes?

This puts a stranglehold on demand. To sustain these crazy home prices, San Francisco needs to bring in an endless flow of highly paid people, including absentee foreign investors, to replace the teachers and other middle-class households, the artists and shop keepers and office workers, and to push out city employees, nurses, and the like. That's how the process has worked.

But that endless influx of highly paid people and investors is grinding to a halt.

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iehi-feed-60424 Fri, 12 Aug 2016 16:27:39 GMT How Much Does Donald Trump Pay in Taxes? It Could Be Zero (THANKS TO RE TAX LOOPHOLES) http://implode-explode.com/viewnews/2016-08-12_HowMuchDoesDonaldTrumpPayinTaxesItCouldBeZeroTHANKSTORETAXLOOPHO.html "I would expect he's paying little or no tax," agreed Steven M. Rosenthal, a veteran tax lawyer and senior fellow at the Urban-Brookings Tax Policy center.

That's because Mr. Trump, as a prominent and active developer, can take advantage of some of the most generous tax breaks in the federal tax code to reduce his reported income to near zero, or even report a loss.

Few tax advisers to major real estate developers would speak for attribution, because their clients benefit from the same tax breaks available to Mr. Trump. But all told me they knew developers in Mr. Trump's league who pay little or no income tax despite hundreds of millions in cash flow.

"Real estate is notorious for throwing off huge deductions," Mr. Rosenthal said. "That coupled with wide latitude in the timing and recognition of income make real estate development extremely attractive from a tax standpoint."

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L.L.C.s pass on income tax-free (and, equally important, losses) to their owners. Real estate L.L.C.s can generate enormous losses, even with millions in revenue, because of depreciation, interest payments, real estate taxes and operating costs. Mr. Trump can use paper losses to offset taxable income, such as interest, dividends, royalties and employment income.

That's a loophole that was eliminated for most investors in the landmark tax reform legislation in 1986. But because of aggressive lobbying by the powerful real estate industry, so-called active developers like Mr. Trump were exempted from restrictions on using such paper losses to offset ordinary income.

The tax value of Mr. Trump's paper losses may well exceed his investment in the underlying properties, because he and other developers typically make minimal down payments and use as much debt as possible to finance a purchase. To take just one example, Mr. Trump bought what is now the Trump National Doral Miami resort and golf club for $150 million while it was in bankruptcy proceedings and financed the purchase with $125 million in loans from Deutsche Bank.

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At least interest is a cash payment. Depreciation is a noncash charge, and is largely an accounting conceit that benefits real estate investors. The theory is that real estate loses value over time and is eventually worthless. As everyone surely knows, most real estate has historically appreciated in value.

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Depreciation is ordinarily recaptured and taxed when an asset is sold. But Mr. Trump and other developers can benefit from provisions that make that unlikely. If they sell appreciated properties at a large profit but use the proceeds to buy other real estate, the transactions may be considered a "like-kind" exchange. If so, there's no tax on the gain.

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"It's a big loophole," Mr. Rosenthal said of the like-kind exchange provisions. "It allows well-to-do and well-advised taxpayers to defer their tax liability potentially until death."

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iehi-feed-60376 Thu, 04 Aug 2016 22:28:21 GMT Rental Appreciation Already Peaked According to New CoreLogic Index http://implode-explode.com/viewnews/2016-08-04_RentalAppreciationAlreadyPeakedAccordingtoNewCoreLogicIndex.html iehi-feed-60372 Thu, 04 Aug 2016 18:21:28 GMT Manhattan Luxury-Condo Glut Ends Developer Rush for Land Deals http://implode-explode.com/viewnews/2016-08-04_ManhattanLuxuryCondoGlutEndsDeveloperRushforLandDeals.html Sales of parcels for development are plummeting as builders, seeing signs that a once-hot property market is cooling, offer prices that sellers won't agree to. Just 48 land deals were completed in the first half of 2016, compared with 79 in the year-earlier period and 73 in 2014, according to brokerage Ariel Property Advisors. That may be a sign of a broader real estate slowdown to come, since land is often a leading indicator for the rest of the market.

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Residential properties, typically the most profitable use of Manhattan plots, are the primary drivers of land values in New York, according to Jon Epstein, a principal at brokerage Avison Young. A year ago, the baseline assumption was that a condo project could generate $2,500 per square foot when completed, he said. Now, that number is closer to $2,100. Bids for development sites are coming in 20 percent below what sellers were getting at the peak, leading to a stalemate, he said.

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iehi-feed-60370 Thu, 04 Aug 2016 01:54:12 GMT China's Trouble With Bubbles http://implode-explode.com/viewnews/2016-08-03_ChinasTroubleWithBubbles.html iehi-feed-60344 Mon, 01 Aug 2016 14:13:04 GMT End of an Era as China's Love Affair With U.S. Real Estate Fades (AMIDST CAPITAL CRACKDOWN) http://implode-explode.com/viewnews/2016-08-01_EndofanEraasChinasLoveAffairWithUSRealEstateFadesAMIDSTCAPITALCR.html ``The residential-property market here, especially for those priced between $2.5 million to $3 million, has been affected by China's measures to control capital flight," said the New York City-based Keller Williams Realty Landmark broker. "You need to cut the price, or it may take a real long time."... In terms of U.S. dollar value, the total share of Chinese buying of international sales dropped from 27.5% to 26.7%.

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The Chinese authorities have been compelled to increasingly tighten the noose on cross-border capital flows to defend the yuan and to slow down the burnout of the nation's foreign-exchange reserves since then. This includes increasing scrutiny of transfers overseas, to closely check whether individuals send money abroad by breaking up foreign-currency purchases into smaller transactions.

New measures were also introduced in December to crack down on illegal China UnionPay Co. card machines, which were suspected of being used to channel funds offshore via fake transactions. Meanwhile, illegal foreign-exchange transactions from underground banking were brought to regulators' attention, as China busted the nation's biggest underground bank, which handled $62 billion, according to a November report by the official People's Daily.

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