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China’s real estate uncertainties persist, fueling market anxiety

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Listings of apartments for sale at a real estate office in Shanghai, China on Monday, August 30th, 2021.

Qilai Shen | Bloomberg | Getty Images

BEIJING – Wild swings in Chinese real estate stocks and bonds keep investors on their toes – these headlines could cause the sector’s troubles to affect the rest of the economy, S&P Global Ratings says.

While Evergrande stock’s plunge has subsided, volatility has continued in other Chinese real estate companies this month.

On Thursday, Kaisa stock rose 20% briefly after it was revealed it could stave off a default. On the same day, a Shanghai-traded bond from developer Shimao plunged 30%, reminiscent of a sharp sell-off in the company’s bonds earlier this month.

“Headlines can hit the mood and spark contagion,” said Charles Chang, senior director and country leader for Greater China for corporate ratings at S&P Global Ratings, in a report earlier this month.

The risk Chang pointed out is that news of default, or even the possibility of default, could deter Chinese homebuyers. And this drying up of demand would drive the construction companies out of business along with the construction companies and other suppliers who work with them.

The consensus among economists is that the housing slump will be contained as it is being driven by a top-down government decision to limit reliance on real estate debt. The People’s Bank of China recapitulated this view in mid-October, naming Evergrande a unique case and confirming the general health of the real estate sector.

But investors are increasingly concerned about how Beijing’s raid would actually end. News of the default of a much smaller developer, Fantasia, and growing funding problems among other developers began to worsen a sharp sell-off.

I’m not entirely sure regulators and authorities understand the damage this is doing to the offshore market as many investors are not going to return.

Jennifer James

Janus Henderson investors

The Markit iBoxx index for Chinese high-yield real estate bonds holds on to monthly gains after a few weeks of volatile, including a decline of nearly 18% in October and a decline of almost 11% in September.

“It’s a really tough time for investors right now, probably more bond than equity investors, because what we are really seeing is political change that is happening in real time,” said Jennifer James, portfolio manager and leading emerging markets analyst for Janus Henderson Investors , CNBC announced earlier this month.

Worse still for overseas institutional investors, who are usually more comfortable with detailed messages from corporations and policymakers, China’s system tends to rely more on broad-based government statements and cautious corporate disclosures.

This lack of clarity has been a long-standing problem with investing in assets related to China.

Investors left in the dark

Instead of making announcements to companies during the worst sell-off earlier this month, James said she often learned how they were doing days or weeks later through news reports. This includes meetings with the government.

“I’m not entirely sure regulators and regulators understand the damage this is doing to the offshore market as many investors will not be returning,” said James.

The uncertainty exacerbated the situation, as the research institute Rhodium Group pointed out in a statement on Tuesday.

“The main political signal was a no-signal: the lack of a clear decision on what specific action needs to be taken to resolve Evergrande’s situation and curb the contagion in the real estate sector,” said analysts at Rhodium Group.

“Officials underestimated the severity of the contagion and systemic concern, made confusing promises to prevent a full settlement, and eventually claimed that the initial political disciplines that sparked the real estate stress were misinterpreted,” it said.

“If the government intended to build confidence in the direction of financial reform, the result was just the opposite,” they said.

For investors left in the dark, the resulting fear meant that they would rather sell than stay invested.

“The problem is that if the market impact is well beyond what you would have reasonably expected in early October, you have to ask yourself, ‘What is the macro impact?'” Jim Veneau, Head of Fixed Income, Asia, AXA Investment Managers, announced CNBC earlier this month.

The potential macroeconomic consequences can be significant.

Real estate and related industries make up about a quarter of the Chinese economy.

The majority of household wealth is in real estate.

S&P says residential land accounts for 85% of local government revenues from land sales.

According to Rhodium Group, land sales to property developers provide vital revenue for local governments as they cannot generate enough tax revenue to pay all of their expenses.

But developers won’t want to buy as much land now as negative investor sentiment is making real estate companies difficult to finance. The business cycle for Chinese real estate companies depends heavily on adequate funding to ensure consumers get the homes they paid for before completion.

Developers are fighting for funding

Unlike other industries, Chinese developers relied much more heavily on the offshore bond market, which gave them access to foreign investors.

But that funding channel began to dry up as negative sentiment built around real estate companies on concerns that Evergrande – which owes more than $ 300 billion – could default.

According to Dealogic, the number of Chinese real estate high-yield bond deals fell to just two deals in October, valued at $ 352 million. That’s a drop of $ 1.62 billion for 9 deals in September and a high of 29 deals worth $ 8.5 billion in January, the data showed.

These tight financing conditions reflect a relatively difficult environment for property developers to obtain capital on the mainland as well.

Read more about China from CNBC Pro

“A lot of simple things can happen through messaging,” said James. “Someone can come out and say, this is a very important part of our economy and we will always support you.”

However, one of the most recent reports from the People’s Bank of China was that the property market remains healthy overall.

Therefore, Ting Lu, chief economist for China at Nomura, does not expect a change in real estate restrictions until the spring.

– CNBC’s Weizhen Tan contributed to this report.

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A California court just returned real estate it took from a Black family in 1924. It could be the beginning of a wave of redistribution.

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California Governor Gavin Newsom shakes hands with Anthony Bruce after signing the law to return land in Manhattan Beach to his family.Ringo HW Chiu / Associated Press

  • The state of California has returned the land that it took years ago to the Black family.

  • It is the first time black Americans have recaptured land that has been taken from them by significant domains.

  • Activists want this to be a precedent, but there are logistical hurdles.

The Bruce family gets their land back. It is the first time black Americans have successfully reclaimed land that the government has taken from them, raising hope for families like her who have lost their homes throughout US history.

The family regains ownership through a law signed by California Governor Gavin Newsom in September. In 1924, the city of Manhattan Beach used a significant area to wrest land from the Bruces, says Newsom’s office. Eminent Domain is a law that allows the government to take privately owned land and recapture it for public use. The procedure includes compensation for the previous landowners, but otherwise they have no other choice of surrendering their property.

Newsom signed the land over to the descendants of Willa and Charles Bruce, who left Manhattan Beach after facing racial harassment from the Ku Klux Klan and their white neighbors in the early 20th century. Willa and Charles turned the property into the West Coast’s first black resort and named it “Bruce’s Lodge” when racial segregation kept them away from most other beaches.

The KKK tried to burn the resort down. White Manhattan Beach residents harassed resort customers.

The city seized the land, claiming they wanted to turn it into a public park – they never did. It remained as an empty lot before it was transferred to the state, then LA County.

The Manhattan Beach government recognized the racist motive for occupying Bruce’s Lodge twenty years later in an article for the Redondo Reflex newspaper by one of the city council members who voted for it, Frank Doherty.

“We thought the Negro problem would stop our progress,” he wrote in 1945. “We had to acquire these two blocks to solve the problem, so we voted to condemn them and build a city park there. We had to protect.” ourselves.”

The story goes on

There are still obstacles to the nationwide reclamation of Black Lands

The landmark case of the Bruce family inspires others who hope it will set a precedent. However, experts say proving original ownership can be quite a challenge.

Kavon Ward, the co-founder of Where is My Land group, helped fight on behalf of the Bruce family. She told the Washington Post on Monday that she heard from more than 100 people willing to argue that they have a legitimate claim to property that does not currently belong to them.

The land of Bruce’s Manhattan Beach was relatively clear – their historical claim to the property was well documented through their resort and the violence they were subjected to. Few other cases are supported by written history.

The historical confiscation of black property is at the center of the current disparities between black and white wealth in the United States. In the first quarter of 2020, 44% of black households owned their homes while 73.7% of white families owned their homes, according to the US Census Bureau. That gap is even worse in individual cities – for example, according to a study by Redfin, only about 25% of black families in Minneapolis own their homes.

According to the Federal Reserve, the typical black family owns only about 10% of the average white family’s wealth. Phenomena such as redlining and blockbusting – the effects of which will continue even after the Fair Housing Act of 1968 was passed – are also responsible for the stagnation of black home ownership and wealth in the United States.

When it comes to significant domains, this type of relationship with ex-black owned real estate is evident: even our most sprawling national icons, like Central Park in Manhattan, are not immune.

Read the original article on Business Insider

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2022 real estate forecast paints grim picture of housing market in Texas

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According to Realtor.com’s 2022 Real Estate Forecast, released Wednesday, demand from first-time buyers will outpace the domestic real estate market’s recovery as Americans stand a better chance of finding a home but face a competitive sellers’ market.

The year will also be a mix of housing affordability challenges and opportunities, as listing prices, rents and mortgage rates are expected to rise, according to the website.

Realtor.com predicts that home sales will hit their 16-year high in 2022, up 6.6 percent year-over-year. Buyers are expected to remain active and inventory for sale is expected to begin to rebound from the recent sharp declines. The real estate agent is forecasting record list prices, skyrocketing sales and limited options to sell homes as existing property listings lag behind pre-COVID levels. The supply shortfall in the construction of 5.2 million new homes could also shrink as builders continue to ramp up production, which is expected to increase by 5 percent year-on-year.

“Whether the pandemic delayed plans or created new opportunities for a move, Americans are poised for a tumultuous home buying year in 2022. With sellers expected to enter the market due to continued strong buyer competition, we expect strong growth in the Home sales at a more sustained pace than in 2021, “Realtor.com chief economist Danielle Hale said in a statement.

“Affordability will become increasingly challenging as rates and prices rise, but working remotely can expand search areas and allow younger buyers to find their first home sooner than usual,” continued Hale. “And with more than 45 million millennials in their prime ages 26 to 35 making first-time purchases by 2022, we expect the market to remain competitive.”

Sales in the Austin Metro real estate market are expected to increase 4.7 percent, with prices expected to increase 3%. Dallas-Fort Worth is expected to see sales growth of 8.3 percent on a price increase of 4 percent, El Paso is expected to see sales increase of 10.6 percent on a price increase of 5.1 percent, and the Houston Metro region is expected to be around 2.6 percent and 2.4 percent rise percent in prices. McAllen Mission is expected to increase 5.9 percent in sales and 5.1 percent in prices, and San Antonio is expected to increase 5.1 percent in sales and 3.5 percent in prices.

According to Realtor.com, potential sellers are increasingly planning to enter the market this winter, although affordability will play an increasing role amid rising mortgage rates and house prices. A growing economy, strong labor market, and flexibility in the workplace should enable first-time buyers to buy houses without breaking the bank.

Home buying could also become the more affordable option, Realtor.com said, with rents expected to exceed home prices for sale in 2022. Rents are expected to rise 7.1 percent and home prices 2.9 percent year-on-year. The home ownership rate is expected to increase slightly to 65.8 percent in 2022.

Recent survey data shows that over half (53 percent) of potential buyers planning to buy their first home within the next year are millennials, according to Realtor. This first time home buyer demand is expected to exceed both new and existing home ownership. Home buyers will face fierce competition for the next three years, real estate brokerage projects as millennials look for first-time homes, Generation Z increasingly enters the housing market, and more older Americans try to downsize.

Recent survey data also shows that 19 percent of potential sellers want to move because they no longer have to live near the office, up from just 6 percent in the spring, according to Realtor.com.

Realtor.com predicts that suburbs will continue to be more popular than large urban subways as home shoppers look for relatively affordable and larger homes. The typical 2,000-square-foot single-family home price rose double-digit years (16.7%) in October, meaning buyers may have to sacrifice additional space to afford a home in their desired area.

“Our housing forecast suggests we have another dynamic year of activity ahead of us, but 2022 will also be fraught with mounting pain as we progress from the peak of the pandemic to a new normal,” said George Ratiu, manager, economic research for Realtor.com said in a statement. “With most real estate markets going to be competitive by 2022, it’s important to remember that you are in the driver’s seat on your real estate trip.

“The bottom line for buyers is making sure you are on top of your schedule and budget – and especially for younger buyers making this massive financial decision for the first time,” Ratiu continued. “For sellers, consider your local market conditions and the likely increase in the number of homes for sale, and market your prices at a competitive rate.”

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Here’s why the luxury housing market is exploding in Metro Phoenix

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In the past five years, the average home price in the Metro Phoenix market has nearly doubled. The average home price in Phoenix is ​​$ 405,000, according to Redfin market data, compared to $ 215,000 five years ago. From April through June, homes across town had their lowest number of days on the market, down from 22 days in Phoenix.

According to Redfin market reports, the average retail price of single-family homes in Scottsdale is $ 900,000, up 20% year over year. In the paradise valley. The median median single-family home sold for $ 2.8 million, up 34% year over year and more than doubling since late 2016.

ALSO READ: The 5 Most Expensive Cities in the Arizona Real Estate Market

As of October 2020, 32.7% of Scottsdale homes have sold above list price.

The luxury real estate market is subject to the same trends as the rest of the market. Low inventory levels, supply chain issues with new builds and demand, and rising prices are affecting both markets.

At the same time, people are migrating to the county for the same reason as the rest of the luxury market. Maricopa County is one of the fastest growing areas in the country and much cheaper than other areas.

Babbi Gabel, founding partner of RETSY.

“The same house that someone here could buy for $ 6 million would have cost maybe $ 12 million in the Bay Area,” explains Babbi Gabel, founding partner of RETSY.

About half of the houses that Gabel’s customers are looking for are second homes.

But what makes a luxury house luxury? Gabel describes them as homes that are custom built, have bespoke finishes, or have a unique aspect, starting at around $ 1.5 million.

Five to ten years ago, Scottsdale and Paradise Valley weren’t a $ 5 million market; today, prices average between $ 4 million and $ 6 million. Increased material costs have led to more expensive conversions and new builds in the luxury housing market.

“We’re starting to see new builds in the $ 7 million to $ 20 million price range. That was completely unknown five years ago, ”she explains.

Buildable land also contributes to rising prices. In places like Paradise Valley, which is surrounded by inland land with no room for expansion, home builders are paying nearly $ 2 million per acre. In order for the new building to be profitable, they have to build at a much higher price per square meter.

Gabel says that like the non-luxury market, inventory is lower than ever, but demand is still high. She notes that she had 571 active listings in Scottsdale in 2020 and down from 333 listings in 2021. And like the rest of the market, homes have multiple listings and sell quickly.

“There are times when the luxury market does its own thing, but what we’ve seen in the past three years is just one insane market across the board,” says Gabel. “My partner and I currently have 20 buyers valued at over $ 2 million who are looking here in the Valley. We can’t find anything. “

She predicts that these trends will continue in the future.

She concludes: “In the next four to five years, growth and demand will continue to drive the housing market. Provided there is nothing unpredictable and interest rates or inflation do not go up. ”

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