A Shift In Relative Value?
Readers raised the question of a change emerging in housing markets. “Is the difference between limited bubble deflation in New York City and a few other cities relative to the rest of the country indicative of a shift in relative value? Of is the relatively low amount of cash out refi, HELOC and subprime mortgages in these markets, and thus lower rates of foreclosure, merely allowed extend and pretend to disguise price drops by keeping houses off the market?”
“There are those who have asserted that a limited number of cities that attract billionaires around the world are doing ‘better’ (ie. are less affordable) than other markets in the same countries. But I don’t think we have enough billionaire’s to fill a city with 3 million housing units. The city has become more attractive relative to the suburbs. And young people from across the country because they want to live in cities, and there are only a few left in the U.S. that aren’t socially and economically dead.”
“But those young people cannot afford the prices being charged, and neither can those who grew up here, who tend to be worse off. And although NYC immigrants are far more likely to be legal and come from around the world rather than just Mexico, most of them can’t afford it either.”
A reply. “NYC people don’t need cars as much, live in condos which don’t need renos or pools, but possibly take same or more amount of vacations. They probably have more trouble arranging financing on condos and I think they have a higher percentage of condos to single family homes than other parts of NA. I don’t know if the higher population of bankers and Wall St people have anything to do with it.”
“Once located I would also imagine they are more prone to stay in place and therefore a larger percentage had their homes before the carnage. Didn’t they have, or still have, tough rent controls which might be locking related ownership values in place. I know the prices of condos in Toronto and Vancouver are higher than NYC - much - except for the ultra penthouse types.”
“It will be interesting to see how this thread develops. You could be identifying the new ‘Class System’ for America. Economics certainly will have to be considered (jobs).”
One added, “I think it has much more to do with the corrupt transfer of borrowed money TO the banking elite (i.e., ‘New York’), FROM the rest of us. That, of course, is temporary.”
“Vancouver has nothing to do with it. You could just as easily argue that ‘Vancouver condos are more expensive than Arizona condos. Therefore, Arizona condos are underpriced.’ Canada = Socialist housing bubble = Bigger problem.”
And finally, “It’s not just the city. I live 300 miles to the west and it is taking a very long time for the price wishing to crack. It has started, and the voices have changed, but the prices are still in the sky.”
From Westfair Online in New York. “Stamford’s Palmer Hill development is more bustling today with trucks and tradesmen than it has been in the past two years. Palmer Hill townhomes range in size from 2,000 to 4,000 square feet and are currently priced from the low $600,000s to more than $1 million.”
“‘The dream of the single-family house for young couples isn’t the overriding desire today,’ said Bill McGuinness, president at Palmer Hill Partners. McGuinness said for couples commuting to New York City, a clubhouse, swimming pool and zero external maintenance on brand new construction is a major plus over moving into an older home.”
“‘It definitely relates to the instant gratification generation,’ said McGuinness. ‘But what it really comes down to is they are more able to buy.’”
The Day in Connecticut. “Farmington-based developer Mark Steiner, who has an $8 million agreement with the state to buy the former sanitarium and home for the mentally disabled, wants a zoning change to eliminate the age requirement and add new language that would permit the demolition of one or more historic structures on the 32-acre campus. In an interview Steiner said the market for age restricted housing has shifted since the requirement was put in during the late 1990s, and there have been ‘a number of failures.’ ‘Most people who buy age-restricted are in their 70s,’ Steiner said. ‘It’s not a reliable market.’”
“Steiner plans to market the development to people who live in metropolitan New York for second homes and to empty-nesters. Steiner said the price of the condos would start at about $500,000. ‘If you are going to spend $500,000 and you have kids, you are more likely to buy a house with a yard,’ Steiner said.”
The Philadelphia Inquirer in Pennsylvania. “As Philadelphia wraps up a five-year planning effort…a detailed master plan, which will be presented to the public Monday evening, shapes the empty acres along the central Delaware waterfront into the flagship of a 21st-century lifestyle city, with dense neighborhoods of middle-class housing, street-level retail, gracious parks, restored wetlands, and a riverside recreation trail.”
“The place imagined in the plan bears little resemblance to the celebrated waterfront neighborhoods of Vancouver, British Columbia, and New York’s Battery Park City. The plan’s shorter skyline is an up-front acknowledgment that the low housing demand in Philadelphia cannot support a continuous wall of urban high-rises. The city no longer harbors any expectation that a vibrant waterfront neighborhood will spring full-blown from the pages of the plan, said Thomas P. Corcoran, president of the Delaware River Waterfront Corp., which commissioned the strategy.”
“‘Our goal is to hit singles and doubles, and not try to hit for the fences like we did in the past with Penn’s Landing,’ Corcoran said.”
The Washington City Paper. “For the last two years now, reports have said the same thing with such regularity that they’ve ceased to even make headlines: The housing market is in freefall, except around here. While home prices had reached a new low for the recession nationally on the closely-watched Case Shiller Index, the D.C. area posted a robust 4.3 percent growth rate since last year. It was as if the real estate crash were already ancient history.”
“For rockstar urbanist Richard Florida, the D.C. area is just another vindication of his theory of the ‘creative class,’ which dictates that cities do better when they attract people in the fields of science, technology, arts, and ‘professional fields.’”
The Palm Beach Post in Florida. “The Palm Court at Wellington is a model of real estate reinvention. An apartment building turned condominium, pillaged then deserted by investors, it has been rejuvenated by a bulk buyer who recycles units back into rentals with prices in the $1,200-a-month range. But some remaining boom-time buyers feel conquered rather than liberated.”
“As real estate’s rule changes turned the tables on winners and losers, Palm Court’s discord is mirrored in shared communities throughout Florida. Glory-day investors hoping to pad their retirements now make payments on homes worth a pittance of their purchase prices and in communities where they have little say over the future.”
“‘We’ve taken the eyesore of Wellington and turned it into a very nice place to live,’ said John Slattery, who, as director of acquisition for the bulk buyer, is president of the Palm Court homeowners association. ‘There were drug dealers, pit bulls, derelict cars, garbage everywhere. The place was a disaster.’”
LA Downtown News in California. “The construction cranes are returning to City West. Although there may not be as many as were seen in Downtown circa 2006, in a couple of years, they will give way to new residents. Although the development is earning praise, it is vastly different from what was first proposed for the site. When initially broached in 2007, 1111 Wilshire was envisioned as a 398-condominium complex priced at $200 million. Like many projects announced at the height of the market, it stalled and was downscaled. Unlike many of those same projects, it has actually secured funds and moved to construction.”
“The seven-story structure will rise on the site of a former parking lot. Apartments will range from studios to three-bedroom units and from 527 to 1,319 square feet. They will be decked out with granite counters, wood-plank vinyl flooring and stainless-steel appliances. Some residences will feature floor-to-ceiling windows.”
“‘We think it’s a really appropriate density for the center of City West,’ said Tom Warren, chief operating officer of Holland. ‘The high-rise was anticipated to be condos but the market turned and we believe the market for rental housing will be strong for a number of years.’”
The Vancouver Sun in Canada. “A growing belief that Metro Vancouver’s hot housing market is being driven by Asian investment, primarily from mainland China, is a misconception, according to experts in the real estate field. In fact, they say, evidence suggests buyers are mainly Canadian citizens, immigrants or new residents in Canada -many with strong links to mainland China and many residing and working in China while their families establish roots in B.C.”
“Most purchases are also being made as long-term holdings - in some cases for children attending local universities -with little of the quick ‘flipping’ prevalent in previous hot markets. ‘From what we’ve seen from most of the major launches, it’s a different buying habit than previous runs on the market,’ Jennifer Podmore, real estate advisory leader for accounting giant Deloite, said in an interview. ‘Generally, we’re not seeing the investor as the main drivers of the market. There are certainly a lot more Asian purchasers, but not Asian investors coming to purchase a condo and then leaving.’”
“Daryl Simpson, Bosa Properties’ vice-president of sales and marketing, agreed, citing their 202-unit Sovereign tower in Metrotown that recently sold out in one day, largely to ethnic Chinese buyers. However, it’s incorrect to identify the buyers as mainland Chinese, he said, because most came from other parts of Metro Vancouver. Some may have connections with mainland China, but no more than ‘half a dozen buyers’ had addresses outside Canada.”
“Robert Dominick, VP of sales and acquisitions for WestStone Properties, said Asian buyers are fuelling sales at his 393-unit Surrey City Centre highrise, Ultra. ‘We opened the door for [our most recent] sales two weeks ago. We didn’t advertise and simply through phone calls to Asian realtors in our first week we generated 23 sales.’”
“Dominick said some buyers showed up on buying trips organized by Chinese-based tour operators, but that most aren’t interested in ‘flipping.’ He said many buyers involve China-based husbands with family in Metro Vancouver, while some want a condo for their children attending the nearby Simon Fraser University campus.”
“Polygon Homes president Neil Chrystal said it’s difficult to say how many buyers are mainland Chinese investors, adding that ‘we see a lot of people speaking Mandarin, which is an indication.’”
