Saturday, January 01, 2011

Cracks In Prices Begin To Show

Article Link

Most builders concede consumer resistance is building up. “Demand has dried up in recent months,” says Subodh Runwal, director of Runwal Group. Consumers believe prices have peaked and are likely to come down. A survey among potential home buyers by real estate website Makaan.com showed that 55 per cent expected residential property prices to fall by 20 per cent or more in 2011. This perception, coupled with an increase in home loan interest rates, has led to buyers postponing buying decisions.

“Pre-sales and underwriting trends are contributing substantially to the existing sales volumes. If we exclude such projects, the market looks extremely risky now,” says Pankaj Kapoor, chief executive officer of Liases Foras.

So far, builders had been clinging on to the price line, despite the build-up of unsold stock. Speculation in the industry is that the steady cash flow from private equity investors and earlier advance sales helped cushion the pressure on builders to reduce prices. These sources seem to have dried up now and we are seeing the high price points finally cracking.

Builders often plead that they have little margin for reducing prices since the cost of land is abominably high. With land costs beginning to decline as the PAL-Peugeot sale indicates, builders hopefully will see reason and offer more affordable prices to home buyers.

66 comments:

Anonymous said...

quality in india is piss poor.

i tried getting a hotel at a tourist place and couldn't find anything that's decently clean. i even tried looking at the most expensive place 7000 rupees a night and still it was dirty.

in the US, getting a 60 dollar hotel online is much better quality in india.

in india, no matter how much money you pay, you can't get anything worthwhile.

Anonymous said...

Anon above:
Maybe the standards are low in India. I traveled by Ist class in train and the bathrooms were horrible. The blankets they provided were stinking. The tea cups and thermos flasks for tea were showing cracks.

India is a long way from perfection. They still have the chalta hai attitude. I think another 40-50 years till they catch up with the west in terms of sanitation and hygiene.

For now, the property bubble that is brewing for the past so many years has to burst. I think the prices will not correct 20% as mentioned in the article but 50-60%in many suburbs of big cities and 40% in metro areas.

I was looking at some data and the following countries seem to have mother of all bubbles in RE:
--Canada
--Australia
--New Zealand
--China
--Hong Kong
--Singapore
--India

I hope all this fiat money being printed in US again this year gets parked again in the countries above to make the bubble evenbigger and then burst with a big noise.

--HB

Anonymous said...

Forgot to include Brazil in the above list.

--HB

Anonymous said...

@Anonymous above

Your comparison doesn't make sense. India's per capita income is less than $1000 where as the countries you mentioned have 5 figure per capita. India's 80% population shits in the open for lack of toilets whereas it is unimaginable in the countries you are drawing parallel with.

Anonymous said...

@Anon above:

You are right. India's per capita is not high and still RE prices are higher than all these countries. Does it make sense?

Right now you can get a nice apartment in DC suburbs for less than $50K which is 25 lac rupees. The rent is $1200 for such an apartment. Inside DC(USA's capital) which is still very highly priced due to bubble, you can get an apartment for $200K which is less than 1 crore and rental is close to $4k per month. In India, prices start from 1 crore even in metro suburbs and inside metro they are very high.

There is indeed no comparison. Prices have to fall 50%.

Anonymous said...

But everybody forgot the black money which is two or three times more then the white money

Anonymous said...

Either RE has to crash.

Or Rupee has to depreciate to 100 to the dollar.

Once QE 2-3-n is over, Rupee will crash

Anonymous said...

Here is a time line of this blog post and comments so far:

Cut and paste link by Vik -> bad quality -> 50% correction -> per capita income -> comparison with US -> black money -> fiat currency (QE2)

I am guessing that now some people will jump in with comments about

corrupt politicians, babus -> investing in gold -> shorting RE stocks -> Navi Mumbai

Next week, another cut and paste post by Vik and more silly comments.

Guys, please get a life. Or, look for a better paying job so you can stop complaining about RE prices. Or, move to the US where you can afford a better quality of life.

Or, get a life...

Anonymous said...

@ Anon 5:48 AM

Why are you loggin to this site if you know about everything? Are you some RE saint and want to preach something to everyone here? may be you are a teacher in some shitty school and no one is heeding your advice and therefore directing here to how to live a life.

Is that the best you could do on public forum.

Well, why are you living if you know that one day you are going to die!

shailesh said...

Seven-year windfall for flat owners

Experts reiterated that it was only after 2004 that money started pouring into the real estate sector. Flush with funds due to foreign direct investments and financial institutions pumping in money, developers started building only luxury housing to maximize profits, an expert said.

“Land prices went up mainly after banks made it easy for builders to avail of funds,” said a source. Another reason for the boom during this period, however murky it might be, was that politicians had started pumping their ill-gotten wealth in the real estate companies in Mumbai and treated them as front offices.

Said Pankaj Kapoor of Liases Foras, a real estate rating and research company, “In 2004, the average price of a flat in Mumbai was Rs 27 lakh. Today, it is Rs 2.13 crore. During the same period, incomes have risen at the rate of 11% annually, while apartment prices have gone up by 33% every year since then.”

According to Kapoor, though there has been appreciation of realty values, its impact can only be felt once an owner sells his property. “In 2002, a person paying Rs 8,000 a month as rent in Andheri could think of buying a flat in Kandivli and pay an EMI of Rs 8,000 on a home loan. The loans usually make up 50% of the total value of a property. Today, the scene has changed. In Kandivli, the rent has gone up to around Rs 20,000 a month and the EMI could be as high as Rs 50,000. The disparity is huge.”

shailesh said...

People forget that House, when bought on Loan, becomes leverage investment. So, if Income increases by 10%, does not mean home prices should increase also 10%. Just the above calculation shows how nuts have people become on real estate. 50K EMI when you can rent the same place to 20K !!!

Vik said...

With regards to the anonymous poster who is trying hard to lure buyers into buying overpriced real estate, please go and buy few more flats on my behalf. I will buy it from you in two years at double the price.
There is no logic to paying 1cr for a 2 bedroom in remote suburb of Mumbai with 500 sq ft carpet area even if you earn 25L a year. Unless you have got money from black sources or you have another investment you have cashed out of, there is no way most professionals will take this plunge. I have several friends who are investment bankers in Mumbai earning fat sums of money. They rent in Bandra/Khar/Santacruz and work in BKC. If there is anyone who can buy it is them and I can safely say they earn more then most Indians do.
I would say be very careful before being sorry. 2011-2012 will see the air getting sucked out slowly of highly priced properties.

Anonymous said...

Those who are looking for bargains, please visit "ADARSH coop society " located in colaba. Rumours are that flats are sold on paper value and one can pocket a 2 b/r flat for 50 lakhs.

Good Luck

Anonymous said...

Share of top five investing countries in FDI inflows. (2000–2010)[127] Rank Country Inflows
(million USD) Inflows (%)
1 Mauritius 50,164 42.00
2 Singapore 11,275 9.00
3 USA 8,914 7.00
4 UK 6,158 5.00
5 Netherlands 4,968 4.00

***1 & 2 - Companies set up by indian politicians - mostly from southern states


*** 3, 4 , & 5 - same by not so bright northen politician with the help of their relatives


Most of the money has gone into real estate. If Indian Rupee crashes, the exodus of this money will be quick leaving many middlemen bankrupt or at the mercy of gangsters.


Let us watch and see what 2011 brings .

Anonymous said...

1. Mauritius - Hand to mouth country. Half the population is indulged in bootlegging or prostitution. The investors have invested $50 billion US, in India, that too a starving economy

TOO GOOD TO BE TRUE!!!!!!

2.98% of singapore economy is dominated by chines origin people and they wouldn't invest a dollar in countries like india, pak, bangla. Yet FDI in India is staggering 11.2 billion US dollars
TOO GOOD TO BE TRUE!!!!!!

The politicians who loot people invested their loot back in India through factious investment firm registed in these countries.

Now, the big banks also have a hand in the pie.

We suckers sitting here and cursing black money!!

Black money is just a myth.

Desi Batman said...

Black money is just a myth.

Really? Wake up...
Black money trail: 'India drained of Rs 20 lakh crore during 1948-2008'

shailesh said...

One good thing out of Navi Mumbai airport is improved connectivity. That effectively increases land supply in MMR region, taking the running out of land out of equation.

New airport prompts railways to convert Panvel into rail hub

With the new airport coming up at Panvel the railways want to ensure connectivity to the spot and will turn it into a hub. “We have plans to extend the local train corridors over the entire Mumbai Metropolitan Region. Panvel will be a sort of a hub for local trains that ply to CST or Churchgate. The corridors have been elaborately planned in the third phase of Mumbai Urban Transport Project (MUTP),” Dr PC Sehgal, managing director of Mumbai Railway Vikas Corporation told DNA.

Among the major projects listed are extension of local trains from Panvel to Karjat, building a new suburban line between Virar-Vasai-Diva and Panvel and building a fast-train corridor on harbour lines.

Anonymous said...

If the US stock market performs well this year as evident from its first day of trading, the following may happen:

--Money flowing from FIIs to India will reverse back to US markets. Sensex will not see growth and could fall substantially.
--Oil will go higher and could cost $4/gallon in US in the next 2-3 months. India will not be able to take the burden of rising petrol prices and inflation will get very high.
--RBI would have no choice but to raise rates at least 1.5-2% in the next 6-8 months.
--US housing will crash further by 20%.
--USD, commodites and gold is another story for another article.
--India RE will start seeing stagnation and lower prices. But a full blown crash may be evident towards the end of this year.
--If RE crashes, RBI will lower the rates again to stimulate the economy.
--In the next few years, India may be too much burdened by debt that its ratings for bonds may be downgraded thereby bringing a decade of very slow growth and pain all over.

--HB

Preeti said...

BB has to talk about the crash for us to believe. Rest of you guys keep predicting there will be no takers.

BB please throw some light, you have been out of action for quiet sometime.

Anonymous said...

Congress govt. is corrupt to the core, what have they done with FOREX which BJP rule had piled up 280 Billion $. Now after 5 years we are stuck with the same balance. This might explain the hoarding of $$$ and use them for black economy. Let BJP rule again, corruption will be contained and increase in FOREX. This should boost $$$ and pull money out of unreal estate. Rupee should become stronger while home price will be reasonable.

Anonymous said...

The economy is a lie, built on ever increasing debt, and maintained by the delusion that the debt can be repaid.

This debt based economy will have its day soon like it is happening in US where the debt based economy has reached an obvious end game.

India's external debt grows 12.8% to $296bn in April-Sept


The whole system of all world economies based on debt may collapse as early as 2011-2012.

--HB

Anonymous said...

I'm shorting India totally. I've found admission to a PhD program in Australia and would move to US from there.

After working in India for more than 8 years now, I cannot afford a flat in Delhi. The asking price is more than a crore.

I think I can use my savings and experience in foreign countries and make the best out of my life.

India is just fucked and is a land of thieves. Not my cup of cake. Will be flying soon to Aussie.

Good luck to those thinking of price drops in RE in India. It will definitely happen but not so soon. The builders, bankers and politicians are all in bed. It may take a while for them to get used to real reality. And Indian stock market is on dope.

What a mess. I can't wait to leave.

Anonymous said...

There will be no cracks. Indians have lot of money and they are ready to shelve $150,000 + for a 1,000 sq ft apartment in big cities. Thats like buying a 1,500 sq ft single family independent home in many US states like Ohio, Texas, Arizona to name a few.

While the house price has gone 5 times in the past 8 years, it has plummeted in US.

So not sure who can

shailesh said...

Flats costing under Rs 25 lakh in Mumbai’s periphery poised to take off

“Most people are just not eligible to buy in Mumbai. Their income is insufficient to apply for a loan. To buy a Rs 50 lakh house, how many people have Rs 15 lakh cash in hand and a paying capacity to serve EMI (equated monthly instalment) payment of nearly Rs 50,000 for 10 years?” asked Pankaj Kapoor, chief executive, Liases Foras, a property research firm.

Many couples from the salaried class are also believed to be settling for apartments in distant locations to avail of tax benefits. A couple can jointly claim an exemption of Rs 3 lakh per annum on interest payment, say tax experts.

The areas that are poised to grow include Kalyan (60 km from south Mumbai), Karjat (100 km), Dombivali, Virar (70 km) and Boisar (115 km) where several townships and affordable home projects are coming up or being planned.

Anonymous said...

Indian economy to slow down in 2011: Experts

Inflation is the bigger threat according to Stephen Roach, Non-executive Chairman of Morgan Stanley Asia. Said Roach, “I think there is no mistaking the inflationary pressures in India and China. It is incumbent on the central banks in both countries to move aggressively to deal with it.” He added, “Clearly RBI is moving very sluggishly in light of the extent of the problem. Likely RBI will have to pick up speed. In which case economic growth will slow and India may not stay the course of an 8.9% growth if there is meaningful tightening.”

Kenneth Rogoff, Professor - Economics, Harvard University feels, “It is not nearly at the levels of India speaking of which obviously your deficit, government deficit has gone up a lot and although it has been successfully funded for a long time, it makes it hard for you to take away the financial repression which eventually will be a bottleneck to growth. So the government deficits do need to be dealt with at some point.”

Anonymous said...

RBI would have to raise interest rates very fast to kill inflation.

To get growth, the Govt. cannot tax the poor and middle class with inflation. Highly immoral. The 900 million who elected them didn't realize what is coming to them in form of inflation.

The country is paying the increased salaries of Govt. employees by borrowing money and is under big debt. What would happen if the country gets downgraded? Would there be austerity like Europe? Would the Govt. employees be willing to take 10% pay cut.

What a scam. Borrow and spend as if there is no tomorrow without even thinking who will pay it back. Just the interest rate on India's borrowings would take major part of tax collection.

Maybe RBI will start printing more money and kill the rupee.

shailesh said...

Added to this, the liquidity in the banking system is getting tighter. All this will result in a correction in expensive markets. Analysts predict residential property prices will correct between 10-25 percent in Mumbai, Delhi, Hyderabad and Chennai. An analysis by Liases Foras, a Mumbai-based real estate research firm, shows that each of these cities has over apartment inventory worth 22 months.

In Bangalore and Pune, the inventory is lower at 19 and 12 months respectively. Coupled with the fact that prices of real estate have increased quickly and are close to their peaks, the oversupply is expected to hasten a correction. “The imminent dip may well be a good entry point for home buyers in these cities,” says Pankaj Kapoor, CEO of Liases Foras.

Expensive Real Estate Markets are Due For A Correction

Anonymous said...

I think one of the following may happen in the next 4-6 months in India:

--RBI raises rates substantially to decrease inflation. This would in turn kill the stock market and deflate the RE bubble as interest rates would be high.

--RBI doesn't raise rates and inflation persists. This means UPA Govt. will be overthrown which means a one day 10% drop in Sensex as markets believe too much in MMS Govt. RE bubble will also burst.

--RBI raises interest rates cautiously. I think this is most likely but it would still bring Sensex down and would raise mortgage rates to slowly deflate the RE bubble.

In any case, the peak for growth has passed. At least for the next 3-4 years there would be enormous pain. Easy money would vanish and pray that India's debt is not downgraded. If that happens, India is another Greece.

--HB

Desi Batman said...

HB,

Appreciate your insight and analysis on Indian economy. BUT Indian economy doesn't run as per text book economy. That said, many Indians don't care what the prices are, they make it a topic of gossip for sometime and then eventually accept everything as is with 'chalta hai' attitude.

Look at Mumbai, do you think there is any inflation or pain of high priced things?

New term for Indians to go along with 'chalta hai' attitude - 'I don't care'.

Anonymous said...

If they would accept chalta hai attitude, they would not cry when onions are 70 rupees per kg.

They have some chalta hai attitude but when it gets too much, they can revolt also. That is the very reason Govt. had to immediatley import onions from Pakistan.

As regards to RE, since many people are rich with high prices, they don't complain. Only new buyers complain.

You have to look at the whole country. 900 million people cannot afford groceries now. The Govt. doesn't work for only the top 5-10% people living in Mumbai or big cities. The remaining 90% also elected leaders and would take them down if insanity persists.

Anonymous said...

First time visitor. Went through few articles. Good information but too may astrologers

Anonymous said...

Anon above:
What is your prediction for 2011?

I think most bloggers here make sense. It is not astrology but economics. Most of the information is provided by others seems logical. Just not happened yet due to political powers. The paper money and wealth on paper has to evaporate.

Anonymous said...

Congresswaoman shot in US. Reasons still not known.

Anonymous said...

here at hiranandani estate thane, sales has come to grinding halt, many investors in new hiranandani raffles projects are exiting and selling their booked flats at discount prices. things are shaping bad, just wait for 2-3 months and 10% correction is nowhere.

Anonymous said...

http://www.blog.happionaire.com/2011/01/lower-parel-is-mini-dubai-and-we-dont.html

Lower Parel is a Mini-Dubai

Anonymous said...

India real estate sector is again shining with Fraud charges. Off course, when there are no buyers only ponzi scheme can run.

http://financialexpress.com/news/builder-who-owns-news-channel-held-for-fraud/730595/1

http://profit.ndtv.com/news/show/citi-fraud-funds-flowed-to-real-estate-sector-too-134765?pfrom=home-Business

http://www.indianrealtynews.com/real-estate-india/delhi-police-recovers-1000cr-from-large-scale-real-estate-frauds.html

Desi Batman said...

If they would accept chalta hai attitude, they would not cry when onions are 70 rupees per kg.
who is crying? Media creating hype. Locals have accepted the high price. I see no riots or protest on streets as we see for every other silly things in India.

They have some chalta hai attitude but when it gets too much, they can revolt also. That is the very reason Govt. had to immediatley import onions from Pakistan.
Govt is confused, I think they don't know what to do except for showing off to people that they are doing something even it is contradicting themselves. E.g. One side they say rise is bcos of hoarders and raid them, on other hand say because harvest was not good and importing same from pakistan. uhh...

As regards to RE, since many people are rich with high prices, they don't complain. Only new buyers complain.
No new buyers means.... no sale and no sale means no gains.

You have to look at the whole country. 900 million people cannot afford groceries now. The Govt. doesn't work for only the top 5-10% people living in Mumbai or big cities. The remaining 90% also elected leaders and would take them down if insanity persists.
But who cares for 900 million people, and looking at past and present one can safely conclude that Govt WORKS for only 5% of rich population.

Anonymous said...

Desi above:

I think you are missing the point. Rs.70/kg for onion is a major problem and not a media hype. Govt. realizes inflation problems and would soon raise rates.

Govt. is not confused, but trying to prevent its existence as onions and potatoes can impeach the Govt.

And your comments about new buyers and the last point are absurd. You need to get real and learn Econ101.

--HB

Anonymous said...

2011-01-10 06:42:06
Soon Coming soon to INDIA:

http://news.yahoo.com/s/afp/20110110/wl_sthasia_afp/stocksbangladeshprotest

DHAKA (AFP) – Police fired tear gas and baton-charged thousands of investors in the Bangladeshi capital Dhaka on Monday as crowds vented their fury after the stock market tumbled nine percent in an hour.

Trading on the Dhaka Stock Exchange (DSE) was halted when stocks fell a record 9.25 percent soon after opening in a plunge that sent outraged investors onto the streets.

The benchmark Dhaka Stock Exchange general index (DGEN) rose 80 percent in 2010, with small investors piling into the market, but has suffered falls in the past three weeks in what analysts described as a much-needed correction.

Police clashed with protesters outside the stock exchange building, where tyres and office furniture were set alight as crowds chanted slogans against the government and market regulators.

Similar protests broke out elsewhere in the country, with at least 500 investors rallying in the southwestern port city of Chittagong, local police chief Rafiqual Islam told AFP.

In Dhaka, riot police reinforcements were called in to break up demonstrations as offices barricaded their gates and windows to avoid being attacked.

“Up to 5,000 investors held protests on the streets in front of the exchange building. Some of them have been violent,” police inspector Azizul Haq told AFP.

“They started vandalising government property, which forced us to use batons against them.”

Television channels showed badly bleeding protesters trying to escape after police wielding sticks beat back the crowds.

“I lost five million taka ($70,000) out of a 10 million taka investment. This is insane — my whole savings are gone,” investor Monirul Islam told AFP at the scene.

Since December 5, when the DGEN hit a record high of 8,918.51, it has fallen by 27.4 percent.

“The exchange has halted trading as per orders from the Securities and Exchange Commission (SEC) after the benchmark index plunged 660 points, or 9.25 percent, in the first 54 minutes of trading,” spokesman Shafiqual Islam said.

The fall was the largest single-day loss in the bourse’s 55-year history.

The number of investors has nearly doubled in the last 15 months to some 3.3 million people.

“I poured all my money into the Dhaka stock exchange,” said investor Humayum Kabir, who had lost 60 percent of his family’s 2.5 million taka in savings.

“The finance minister lured us into the stock market, he told us it was safe, but now we have lost everything. They artificially jacked up the prices of junk shares and now our savings have vanished.”

Anonymous said...

UK house prices could drop 25% this year. That won’t do much for the solvency of their banking system.

http://www.telegraph.co.uk/finance/personalfinance/8250303/Typical-house-price-to-lose-a-quarter-of-its-value.html

Halifax, Britain’s biggest mortgage lender, said average house prices dropped to £162,435 in November, down 1.3 per cent on the previous month and 1.6 per cent on the same period a year ago.

But economists forecast that values will drop even further this year to just £150,000 amid concerns about the economy.

It would mean a total drop of £50,000 in prices from the beginning of the credit crisis in August 2007, when they stood at £199,612.

Martin Ellis, housing economist at Halifax, said: “Uncertainty about the economy, weak earnings growth and higher taxes could put some downward pressure on demand.”

It comes amid growing speculation that the Bank of England will raise interest rates this year to combat higher inflation.

Anonymous said...

Food price riots spread across North Africa. Riots over soaring food prices also preceeded the 2008 market collapse. This tends to happen when central banks and Federal reserves go crazy with their printing presses.

http://www.telegraph.co.uk/news/worldnews/africaandindianocean/tunisia/8250477/At-least-20-killed-in-economic-protests-in-Tunisia-and-Algeria.html

Anonymous said...

Malaysia heading for a giant market bubble like in1997
January 11, 2011 FMT LETTER

From Francis Ngu, via facebook

This is a cost of living crises in the making…of a magnitude not seen since the oil crises of the early 1970s and 1980s.

It is just the beginning of more rises to come in 2011, with the big chill and frost in Southern China and floods in Queensland not factored in yet, to add to food price inflation in India and China.

Add to that the Malaysian government’s refusal to control hot money flowing into the financial markets, all this to end up in a giant market bubble like in1997.

Will GST be introduced ? (service tax is already at 6 %). Multiple inflationary drivers compound each other in 2011, for which fiscal tightening may only be partially effective.

The government has the option of either increasing the subsidies, or perhaps the better option of setting up a sound social safety net or social welfare system for the long term, indexed against against inflation.

Anonymous said...

Same is the case with Indonesia.
Read articles about their stock crash on Google.

Desi Batman said...

HB,

No, I am not missing the point. Food inflation is major problem - agreed. but my point is people in India get used to adjust their lives accordingly. Seen Dharavi and other slums. People talk for sometime and get adjusted to high prices. When middle class starts feeling pain, voice is raised, but then voices start vanishing.

when I said govt is confused, I was making mockery of them. They are smart, looks at the scams they carry out huge and small. Officials would like to be in positions to make huge sums, who in the world like to give that up so easily.

Lastly, for RE to keep gaining momentum of profits, there HAS to be sale, there HAVE to be new buyers else everything is hoax.

Govt works for more in interest of 'have' than 'have-nots'. But they represent themselves as they are working for both, to win elections. Else why would one have inflation of RE, food prices. When shit hits the roof and feel their position is at stake they act to put controls in place.

Anonymous said...

For above-
The time has come now that the shit is hitting the fan. More controls will be in place soon. More scams will be uncovered. Interest rates will go up further. Sensex will go down further. RE prices have no place but to go down. Maybe the sales you are referring to are really happening with only a few buyers and rest of the RE is building excess inventory but prices are not being lowered. They maybe giving free cars but not lower the prices. This was happening in USA in 2005. In 2006, prices started to fall in US and today after 5 years of fall the prediction is for another 20% fall this year. The current prices in US are that of year 1999 prices in a lot of areas. Some metros still have inflated prices at 2003 levels.

No camparison to US, but the same will happen in India even worse as the scam has been bigger in India. Most of the black money component will evaporate and we're here for a 10 year pain in India.

Anonymous said...

Why the American complain about Outsourcing:

Downturn’s Ugly Trademark: Steep, Lasting Drop in Wages
~ WSJ ~ SUDEEP REDDY

In California, former auto worker Maria Gregg was out of work five months last year before landing a new job—at a nearly 20% pay cut.

In Massachusetts, Kevin Cronan, who lost his $150,000-a-year job as a money manager in early 2009, is now frothing cappuccinos at a Starbucks for $8.85 an hour.

In Wisconsin, Dale Szabo, a former manufacturing manager with two master’s degrees, has been searching years for a job comparable to the one he lost in 2003. He’s now a school janitor.

They are among the lucky. There are 14.5 million people on the unemployment rolls, including 6.4 million who have been jobless for more than six months.

But the decline in their fortunes points to a signature outcome of the long downturn in the labor market. Even at times of high unemployment in the past, wages have been very slow to fall; economists describe them as “sticky.” To an extent rarely seen in recessions since the Great Depression, wages for a swath of the labor force this time have taken a sharp and swift fall.

Dale Szabo, who has two master’s degrees, lost a job as a manufacturing manager in 2003. In late 2005 he took a job as a school janitor: ‘I never dreamed I would be doing it. But I have to pay the bills.’

The only other downturn since the Depression to see similarly large wage cuts was the 1981-82 recession. But the latest downturn is already eclipsing that one. Unemployment has stood above 9% for 20 straight months—longer than the early 1980s stretch—and is likely to remain above that level for most of 2011, putting downward pressure on wages.

http://online.wsj.com/article/SB10001424052702304248704575574213897770830.html?mod=rss_whats_news_us

Anonymous said...

How BAD is unemployment in US:

In 2006, there were 26.5 million people who received food stamps. In 2007, there were 26.2 million people in the program. So, the “normal” level of food stamp participation was around 26 million people. Things changed in 2008. The number of participants increased by 1.9 million. We were still in a recession during the first half of 2009. Food stamp participants increased by another 5.2 million people that year. There were then a total 33.4 million people receiving food stamps. The recession officially ended by July 2009, and one would expect the worsening to stop. But millions more who weren’t officially “poor” in 2009 became poor in 2010. When Republicans were trying to extend Bush tax cuts for the rich by keeping social programs hostage, 6.8 million more joined the ranks of food stamp participants. Now, there are more than 40 million people receiving food stamps, though to remove the stigma they don’t call it the “food stamp program” anymore. Now, they use debit cards to distribute the handouts and they call it the Supplemental Nutrition Assistance Program (SNAP). Oh Snap!

Today, there are 14 million more people who try to get by using food stamps than there were in 2007. These are in addition to the usual suspects who have been using food stamps for years. These people aren’t your “average” food stamp participants - these are hardworking Americans who fell on hard times. Insider Monkey, your source for free insider trading data, compiled the list of states that are falling harder than the rest. Here is the list of top ten states with the highest food stamp participation rates:

10. Maine: 17.28 out of 100 receive food stamps

9. New Mexico: 17.33 out of 100 receive food stamps

8. Kentucky: 17.9 out of 100 receive food stamps

7. Michigan: 18 out 100 receive food stamps

6. Louisiana: 18.2 out of 100 receive food stamps

5. Oregon: 18.4 out of 100 receive food stamps

4. West Virginia: 18.41 out of 100 receive food stamps

3. Tennessee: 19.3 out of 100 receive food stamps

2. Mississippi: 19.4 out of 100 receive food stamps

1. District of Columbia: 19.7 out of 100 receive food stamps

Meghana said...

More trouble for real estate developers ...


http://www.moneycontrol.com/news/cnbc-tv18-comments/funding-cramps-developers-costcap-rises-to-25-_512732.html

Funding cramps developers, cost of cap rises to 25%

The real estate sector is once again reeling under fund raising pressure. Sources tell CNBC TV18 that as PSU banks have tightened their grip on real estate loans and developers have begun turning to private funding routes in a bid to lap up capital.

Gone are the days when banks sanctioned real estate loans by the dozen to shore up growth numbers. With the bribes-for-loans controversy, PSU banks are not as keen to lend to real estate, and this is forcing developers to turn to private equity funds and financiers paying as much as 24% interest on some loans.

Anonymous said...

India inflation Story


http://dawnwires.com/business/the-ruling-clan-of-india-has-lost-the-plot-on-inflation-this-is-what-they-said-in-2010/

Anonymous said...

A very good article on RE future.

http://mises.org/daily/4973

Anonymous said...

I think the game is up for RE. Let's see how much Pranab Muk. will try to keep it propped up. Or Montek Singh Ahluwalia. All the Govt. folks are trying is to keep low rates, high inflation and now Montek is saying high inflation means good growth. If he drives a Rickshaw and earns the minimum wage, he would understand what inflation is. Sitting in a high rise and playing with common person's life is easier. Wait till they all have to go out to beg for votes. Policies will start changing suddenly before 2014 elections.

This whole RE mess will crash like a pack of cards. The Govt. folks can only delay it but not prevent it from happening.

Anonymous said...

Spot the Bubbles ~Puru Saxena
Posted Jan 11, 2011

BIG PICTURE – Let the truth be known, the world is being held hostage by powerful bankers. Thanks to the fiat-money fractional reserve system, bankers have become the ruling elite and as a result, entire nations are going bust.

Make no mistake, the world’s most severe recession in decades was caused by excessive debt and in the boom years, bankers provided the narcotic in the form of cheap credit. A few years ago, bankers willingly handed out unserviceable loans and they made fortunes from the interest payments. In those heady days, major banks made obscene amounts of money and their management went home with hundreds of millions of dollars. When the times were good and most debtors were servicing their loans, profits were distributed amongst the banks’ management, shareholders and bondholders. However, when the music stopped and the credit binge turned into a colossal bust, laws were promptly enacted to ‘bail out’ these morally and financially bankrupt institutions.

http://www.321gold.com/editorials/saxena/saxena011111.html

Anonymous said...

Home price drops exceed Great Depression: Zillow

By Al Yoon
NEW YORK | Tue Jan 11, 2011 8:40am EST

NEW YORK (Reuters) - Home prices fell for the 53rd consecutive month in November, taking the decline past that of the Great Depression for the first time in the prolonged housing slump, according to Zillow.

Home prices have fallen 26 percent since their peak in 2006, exceeding the 25.9 percent drop registered in the five years between 1928 and 1933, the housing data company said in a report on Monday. Prices fell 0.8 percent over the month.

It is a dubious milestone for the U.S. housing market which has failed to gain much traction despite a host of government programs to reduce delinquencies and encourage demand with temporary tax credits and lower interest rates. Many economists expect further price drops, even if there are some anecdotal signs of growing demand, such as in pending home sales data.

Anonymous said...

Property prices slowing down in Brazil’s largest city

http://www.propertywire.com/news/south-america/brazil-property-prices-slowing-201101104837.html

The real estate market in São Paulo, the economic hub of Brazil and South America’s largest city, is slowing as figures from local estate agents suggest the property market may have peaked.

…after a sharp escalation in prices in recent years, average prices fell by 3.53% in October last year compared with the previous month.

The data, based on the sales performance of 529 real estate agencies, also shows that there was a decrease of 25.6% in the number of properties sold over the same period.

….it is a sign that the market is returning to normal after a period of unsustainable that was boosted by a greater supply of housing credit and falling interest rates. ‘My perception is that prices are where they should be, with supply more adjusted to demand,’ he said in an interview.

Anonymous said...

Looks like the DOW is on cruise control now, nothing but soothing news in the financial world with the help from QE2.

Anonymous said...

Why is Pranab Muk. not letting the petrol prices adjust to current market prices. The petrol prices will go up by 40% in the next 3 months and let's see if the Govt. will let it to go based on market or would intervene. Bunch of jokers are running the country. They are bent on screwing the middle class.

Laloo Prasad yadav said...

I am sorry to say this Vik,

Now this Blog has become
' Frustrated and Desperate Indian Corporate executives ' Blog.

Some how we have deviated away form Housing and real estate issue in this Blog.

Anonymous said...

Abe Lallu,
RE is tied to the economic scenario. Go and learn Econ 101 to understand RE. You'll learn about interest rates and they affect RE buying. Inflation and its effects.

One other you learn from this blog is the mafia in form of Govt, and builders running this big pozi scheme.

dementic said...

PranobDada says no need to worry about food inflation. Madam Sonia might have told, "roti nahi hai toh cake khaao...."

Anonymous said...

In India interest rates are negative in real terms. RBI has no choice but to raise rates aggressively if they really want to control inflation and some compromise on growth.

--HB

Desi Batman said...
This comment has been removed by the author.
Desi Batman said...

Library land used for constructing premium apartments in Mumbai


Where is the Mumbai RE slow down? As long as builders have money to buy, build and hold on to land, forget RE correction. Be happy with what you already have and can afford.

Capital Allocator said...

There is no question that India is in a real estate bubble. The
Key point is spotting the peak.
If you have more than one house, sell close to
The peak; the actual peak only becomes
Known in retrospect.
Do not buy in a bubble.
Do not hope to buy now and sell before the
Peak; one will know where the peak is or peak
Was, ten years from now!
Sunil Kololgi
Washington DC

Anonymous said...

It is now only a matter of time before real estate in India crashes. The builders are close to breaking point and once they crack, the long awaited correction will start. Buyers, please hold off and let the crash takes its toll of builders and politicians, who have screwed the middle class of India for far too long.

Anonymous said...

Common sense tells me that when anything is stretched to its limit, the break is devastating. Real estate in India has reached totally unrealistic and absurd price levels and simply HAS to crash. Please do not believe the newspaper articles written by journalists, on the payrolls of builders, presenting an optimistic view of real estate prices.

Anonymous said...

Why don't the people of India rise up against the builders and politicians and make it clearly known to them that enough is enough. Their game is up. They deserve to go bankrupt for their unbridled greed.