Friday, July 27, 2018

U.S. Housing Market Looks Headed for Its Worst Slowdown in Years

Real Estate

The U.S. Housing Market Looks Headed for Its Worst Slowdown in Years

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    Market appears to be headed for its broadest slowdown in years
    ‘Affordability is becoming a headache for homebuyers’: Yun
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They were fed up with Seattle’s home bidding wars. They were only in their late 20s but had already lost two battles and were ready to renew with their landlord. Then, in May, their agent called.
Suddenly, Redfin’s Shoshana Godwin told the couple, sellers were getting jumpy, even here in the hottest of markets. Homes that should have vanished in days were sitting on the market for weeks. There was a three-bedroom fixer-upper just north of the city going for $550,000, down from more than $600,000. They made the leap in early June and had closed by the end of the month, for list price.
The U.S. housing market -- particularly in cutthroat areas like Seattle, Silicon Valley and Austin, Texas -- appears to be headed for the broadest slowdown in years. Buyers are getting squeezed by rising mortgage rates and by prices climbing about twice as fast as incomes, and there’s only so far they can stretch.
“This could be the very beginning of a turning point,” said Robert Shiller, a Nobel Prize-winning economist who is famed for warning of the dot-com and housing bubbles, in an interview. He stressed that he isn’t ready to make that call yet.

The Data

A slew of figures released this week gives ample evidence of at least a cooling. 
Existing-home sales dropped in June for a third straight month. Purchases of new homes are at their slowest pace in eight months. Inventory, which plunged for years, has begun to grow again as buyers move to the sidelines, sapping the fuel for surging home values. Prices for existing homes climbed 6.4 percent in May, the smallest year-over-year gain since early 2017, and have gained the least over three months since 2012, according to the Federal Housing Finance Agency. Shares of PulteGroup Inc.fell as much as 4.9 percent Thursday morning after the national homebuilder reported that orders had declined 1 percent from a year earlier, blaming rising mortgage rates.
“Home prices are plateauing,” said Ed Stansfield, chief property economist at Capital Economics Ltd. in London. “People are saying: Let’s just bide our time, there’s no great rush. If we wait six or nine months we’re not going to lose out on getting a foot on the ladder.” That means “we’re now looking at a period in which prices move more or less sideways, or increase no more quickly than growth in incomes, over the next few years.”
Stansfield projects a 5 percent gain this year and a 3 percent increase in 2019. That compares with 10.7 percent in 2005, shortly before the crash.

Supply Lines

Some of the most expensive markets, where sales are falling under the weight of prices, are now seeing substantial increases in supply, according to Redfin Corp. In San Jose, California, inventory was up 12 percent in June from a year earlier. It rose 24 percent in Seattle and 32 percent in Portland, Oregon. Those big jumps are from low numbers, so the housing crunch is still a serious problem.
“Inventory has increased quite a bit,” Godwin, the Seattle agent, said. “We’re seeing less competition.”
Dustin Miller, an agent with Windermere Realty Trust in Portland, said he’s trying to manage sellers’ expectations, something he hasn’t had to do since the end of the last housing boom. One customer, a baby boomer moving to a new home across the state, expected to have buyers fighting over her house. She got one bid, below her asking price.
“Buyers want to shop and take some time, as opposed to having to rush and throw offers in,” Miller said. “It’s the market correcting itself. At some point, you hit a peak of momentum, and then things level off.”
This new wariness was noticeable in the latest consumer-sentiment data from the University of Michigan. In its preliminary July survey, 65 percent of Americans said it’s a good time to buy a home, the lowest since 2008, when the economy was still in recession.
Still, market watchers note that the housing sector has strong support from a healthy labor market and steady economic growth, which indicates a stabilizing trend for home prices rather than anything close to the experience of the crisis, when property values plunged. And shares of D.R. Horton Inc., which builds a lot of starter homes, rose as high as 8.7 percent Thursday morning after the company reported a 12 percent jump in orders.
“The rate of home sales, new and existing, has probably peaked,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics. “But it’s not going to roll over. It will gently decline.”
The homeownership rate in the second quarter was 64.3 percent, up from 63.7 percent a year earlier, according to U.S. Census Bureau data released Thursday.
“While there appears to be a slowdown in the growth rate of home sales and prices, it has not slowed rising homeownership,” Freddie Mac Chief Economist Sam Khater said in a statement -- though he added that the rate is a full percentage point below the 50-year average, reflecting “the long-lasting scars from the Great Recession and the lopsided nature of this recovery.”

New Record

S&P CoreLogic Case-Shiller data hint at the softening. The 20-city index of property values rose 6.6 percent in the 12 months ending in April. After seasonal adjustments, the gauge posted its smallest monthly increase in 10 months, with New York, San Francisco and Washington reporting declines.
Homeownership still remains out of reach for many Americans, especially for first-time and younger buyers. For existing homes, the median price climbed in June to a record $276,900, while properties typically stayed on the market for 26 days, unchanged from the prior three months, according to the National Association of Realtors.
“Affordability is becoming a major headache for homebuyers,” said Lawrence Yun, the association’s chief economist. “You are seeing home sales rising in Alabama, where things are affordable. But in places like California, people aren’t buying.”
In addition, “no one knows how far and how fast” borrowing costs may rise as the Federal Reserve raises interest rates, Stansfield said. Lenders and borrowers alike are less likely to let credit spiral out of control than in 2005 and 2006. And with financing tighter and wage gains in check, “there’s not much scope for prices to continue to increase sustainably” at recent rates, he said.
The cooling, in turn, could curb housing starts, “because builders tend to only build what they think they can confidently sell,” Stansfield said. At the same time, he said, “it will decrease the risk of a bust.”
(Updates with PulteGroup in sixth paragraph and homeownership analysis just above New Record section.)

Angela Gulbenkian entangled in civil suit over Kusama pumpkin

Here's what we're reading this morning...
Check out all of the latest art world headlines on
According to a Bloomberg report, despite having a “minimal amount” of money to her name, Angela Gulbenkian was brokering various deals by using a connection with the Lisbon’s Calouste Gulbenkian Foundation—which told Bloomberg it “does not have any relationship” to her. Bloomberg frames the story as one of what can be the "murky art world." At the center of a new lawsuit is an alleged $1.4 million payment to Gulbenkian from an art advisory firm for a Yayoi Kusama sculpture that never arrived.


She Married Into a European Dynasty. Now She’s Accused of Art World Fraud

    Angela Gulbenkian entangled in civil suit over Kusama pumpkin
    Many don’t know who they’re working with in murky art world
Angela Gulbenkian Photographer: Bruno Simão

It is, to many, a byword for culture and opulence: Gulbenkian.
Six decades after his death, Calouste Gulbenkian, a lion of the early oil age, lives on through the $3.6 billion private foundation and sumptuous fine arts museum that bear his name.
So it’s fitting that Angela Gulbenkian, married to Calouste’s great-grandnephew, enmeshed herself in Europe’s big-money world of art. One moment she was posing for photos with the artist Ai Weiwei. The next she was brokering million-dollar art deals.
Only now, some have begun to wonder: Is Angela Gulbenkian everything she seemed?

Kusama pumpkin
Source: Court Documents

One art adviser has accused her of fraud. In a civil suit, he says his firm paid Gulbenkian almost $1.4 million for a Yayoi Kusama sculpture that never materialized. Documents in the suit, as well as interviews with people familiar with Gulbenkian, indicate that many came to believe that she was affiliated with the two prominent Portuguese institutions with the Calouste Gulbenkian name. That isn’t the case.
And then this: Gulbenkian, in a recent affidavit, said she has a minimal amount of money in the bank.
The story spans from London to Munich to Hong Kong to Lisbon, home to the Gulbenkian foundation and museum. While the tale is still unfolding, it has already exposed a sobering truth about the $64 billion global art market: many people have no idea who they’re working with, or at least the person’s connections.
Buyers and sellers are often linked via chains of go-betweens that stretch across the world. Many intermediaries can get their hands on information about art -- but not necessarily the works themselves -- and offer it to hundreds of people. So-called runners represent neither buyers nor sellers; they simply try to pull together whatever deals they can, in hopes of collecting fees. In the age of Instagram, anyone can embellish an online persona.
“People are buying expensive art and are not doing due diligence on people they are buying the art from,’’ said Christopher Marinello, chief executive officer of Art Recovery International, whose client filed the civil suit.
Angela Gulbenkian, 36, didn’t respond to questions submitted through her lawyer. She has filed an affidavit in the civil suit, and appeared in a court hearing on the case Thursday that, at her lawyer’s request, was ordered by the judge to be kept private.

Foundation, Museum

Lisbon’s Calouste Gulbenkian Foundation is a benefactor of education, science and the arts, while the Calouste Gulbenkian Museum is home to much of the tycoon’s renowned art collection. In the art world, Angela Gulbenkian appeared to encourage the notion that her name brought connections.

Calouste Gulbenkian.
Source: AP Photo

At one point, an assistant of hers used an email address, according to Marinello. On Instagram, where she has about 2,000 followers, she identifies herself as a collector with the Gulbenkian Art Collection. Her handle is @Pantaraxia, the name of an autobiography by Calouste Gulbenkian’s son, Nubar. Until this week, the profile photo depicted a woman in sunglasses and a straw hat, holding a small white dog.
“Angela Gulbenkian is a very respected art collector,” said Astrid-Caroline Cole, a private art dealer in London. She says she sold several works to Gulbenkian. “She has a museum and foundation in Portugal,” Cole said. “Google the Gulbenkian museums!"
But the Calouste Gulbenkian Foundation, which oversees the museum, says there’s no connection.
“Angela Gulbenkian does not have any relation whatsoever with the foundation and, as far as we know, is married to a Gulbenkian family member who is not a direct descendant of our founder," said Elisabete Caramelo, a spokeswoman.
Told of the foundation’s response, Cole said, “I had a very positive working experience with her and cannot comment on anything different. I admit that the market is very opaque and I only have a fraction of total truth or information.”

Calouste Gulbenkian Museum
Photographer: Miquel Gonzalez/laif via Redux

Art Network

The former Angela Maria Ischwang grew up in Munich, where her mother runs an optometry business. She moved to London in the early 2000s and later married Duarte Gulbenkian, a soccer agent. He didn’t respond to phone messages.
After working in marketing and public relations, Angela Gulbenkian set up FAPS-Net, a private company registered in London, with art adviser Florentine Rosemeyer in 2016, according to a regulatory filing. The women were equal partners until earlier this year, when Rosemeyer left; she now operates Rosemeyer Art Advisors, registered in the suburbs of Munich.
Rosemeyer said in a statement that she put Gulbenkian in touch with contacts about the Kusama sale, had no other involvement with the deal and is “shocked” about the allegations.
Rosemeyer’s website promoted Gulbenkian’s marketing expertise, according to a screen shot provided by Marinello. “Due to her unique network and the prominence of the Calouste Gulbenkian foundation in Lisbon, London and Paris, she today brokers high end art works," the website showed as recently as May. The description has since been removed.
The Gulbenkian foundation was actually established to be independent from the family, though its bylaws state that the board would preferably have one direct descendant of Calouste Gulbenkian. He was a major investor in oil interests with Royal Dutch Shell, and held a 5 percent stake in the Iraq Petroleum Co. “Mr. Five Percent,” as he was known, eventually built up one of the world’s greatest private art collections. Today, his great-grandson, Martin Essayan, sits on the foundation’s board.

Angela Gulbenkian often told clients that she bought art for the foundation and attended its board meetings, according to interviews with dealers, collectors and advisers. In a 2017 interview with the Portuguese business-news website Jornal de Negocios, Gulbenkian ruled out the scenario of having any job or interference in the daily management in the foundation. She did envision one of Kusama’s signature pumpkin sculptures in the foundation’s gardens. “It would be breathtaking,’’ she said.

‘Fooled by the Name’

It’s a 179-pound, yellow polka-dotted Kusama pumpkin that sits at the center of the London case.
Mathieu Ticolat, an art adviser based in Hong Kong, claims his firm paid Gulbenkian $1.375 million for the pumpkin, according to papers filed in the High Court in London. Gulbenkian said she represented the anonymous seller. Two money transfers, in April and May of 2017, were made to Gulbenkian’s account at HSBC in London, according to court papers.
Ticolat’s firm says the pumpkin never arrived. After months of pleading and threatening, he filed the civil suit, which included a motion to freeze Gulbenkian’s assets that the judge granted.
“I got fooled by the name,” Ticolat said by phone from Hong Kong.
The work was sold to someone else in late 2017, but Gulbenkian continued to indicate she was trying to get the work to Ticolat, according to the lawsuit.
In the the London High Court this month, Gulbenkian produced an email that she said was from the owner: Martin Winterkorn. A separate WhatsApp message viewed by Bloomberg suggests she was referring to the one-time head of Volkswagen. Winterkorn’s lawyer said in an email that was never the case; the former CEO doesn’t even know Gulbenkian.
However this plays out, it shows just how tricky it’s getting to navigate the murky world of art deals, according to Todd Levin, an art adviser in New York who isn’t tied to the Kusama sale and doesn’t know Gulbenkian.
“When the art market gets really frothy,’’ he said, “all sorts of strange characters come out of the woodwork.”