December 21, 2014

For Real Estate, The Winter Is Coming

It’s Friday desk clearing time for this blogger. “Orlando is primed to see an exodus of investors who bought thousands of houses in the area during the downturn, according to RealtyTrac. Winter Park real-estate agent David Welch has helped cash investors purchase Orlando-area houses in recent years. He said that so far, few have started to sell off their assets, but that prospect looms large. ‘It was great having them come in and grab these things, but at some point they’re going to want to divest themselves,’ Welch said. The investors aren’t likely to collaborate on how they sell off their properties, so it’s uncertain how the market will be affected, Welch added.”

“Wielding the biggest clout among the investor-owners are four institutional hedge funds: Colony American Homes, Blackstone, American Homes 4 Rent and Progress Residential. Holding more than 700 houses in the metro area, those companies have a strong stake in Orlando’s continued housing recovery. ‘I think it’s going to have a chilling effect on any housing market,’ said Daren Blomquist, vice president of RealtyTrac. ‘They are purchasing fewer properties. Demand is weakening, and supply will increase. In the best case, it will be more of a balanced market, but it could turn quickly to a buyers’ market.’”

“A Scottsdale investor has bought 106 metro Phoenix rental houses for $16.8 million, or about $158,255 a home. Scottsdale-based Pacific Rim Properties purchased the houses from a Denver group called Wymont. The deal is one of the biggest sales of a rental-home portfolio since the investor home-buying spree of 2010-12. Of the 106 houses sold, 101 currently are leased. Most of the homes were built in 2004 and have four bedrooms. The purchase price-per-house is about $50,000 less than metro Phoenix’s current median home price.”

“Investing in Valley houses and other markets hit hardest by the housing crash was a big Wall Street play during the downturn. Real estate market watchers are tracking what investors do with their many Valley rentals houses because if too many try to sell at the same time, it could push down home prices again.”

“Kevin Maloney has been a prominent real estate developer in New York for decades. Maloney himself is surprisingly pessimistic about the luxury condo market — at least for someone who is investing millions in it. ‘Citywide, when you get into apartments above $25 million, the air gets very thin very quickly,’ he said. ‘At any one time there are maybe a half dozen people in the city looking for a $50 million plus apartment, and there’s now probably 60-70 of those apartments on the market. There’s going to be some downward pressure at the very high end.’”

“Extell’s tower One57 has only sold one unit in the third quarter — a pace at which it would take the building six years to sell out. Sales at Harry Macklowe’s 432 Park Avenue have reportedly also slowed. With several more condo towers set to hit the market in the coming years, some observers already predict a crisis. ‘If real estate was a publicly traded company and I could short its stock, I would very happily short 57th Street,’ Stonehenge Partners’ CEO Ofer Yardeni said recently. ‘The market there has stopped. It hasn’t just declined five percent or 10 percent. It’s just stopped.’”

“Local and national economists have given upbeat projections about the economy for next year, but with housing activity down, ‘it is hard to feel warm and fuzzy about the 2015 housing market in Las Vegas,’ Home Builders Research President Dennis Smith said in the report. Sales have plunged this year as would-be buyers, saddled with credit woes, flat wages and sticker shock, can’t pay developers’ high listing prices. Moreover, despite ‘what some press releases suggest,’ the resale market has also been slumping, Smith wrote.”

“Real estate agents are describing Las Vegas as a buyer’s market, and listings of previously owned homes no longer get multiple offers or bidding wars, according to Smith. Sales incentives are common, as buyers’ agents get follow-up calls from sellers’ agents asking what the sellers can do to help get acceptable offers. The resale business is slowing as investors, faced with fewer bargains, pull back from Las Vegas.”

“Saskatchewan will see a slight decline in home sales in 2015, thanks to a large supply of listings on the resale market and slowing demand, according to the latest forecast from the Canadian Real Estate Association (CREA). Consumer confidence and job growth in the Prairies may come under downward pressure depending on how far oil and non-energy commodity prices decline and on how long they remain low. ‘The effect of lower oil prices on Canada’s housing markets is something of a wild card at the moment,’ said Gregory Klump, CREA’s chief economist.”

“Some UAE developers are taking a closer look at their off-plan sales to see the level of their exposures to overseas buyers, and especially to those from Russia or one of the CIS states. For instance, with their currency in a free fall against the dollar, Russian buyers with exposure in Dubai’s real estate will have to use up more of their roubles to stick to their dollar/dirham commitments. In summer, just when the Russia-Ukraine strife was heating up, there was reportedly a Ukranian buyer who decided to forego the down payment he had made on a premium off-plan purchase made in Dubai.”

“‘The currency volatility will mean less reliance on overseas buyers, especially from those markets where they are at a disadvantage because of a strong dollar,’ said Anand Lakhiani, Director at Indigo Properties.”

“Wealthy Russian homebuyers are vanishing from London after driving a wave of foreign investment that lifted property prices to records. Only the oligarchs persist. The number of Russians registered through Christie’s International Real Estate to buy homes in the city dropped by 70 percent in a year, said Giles Hannah, the broker’s senior VP. Russian buyers have been ‘eliminated virtually overnight,’ said Andrew Langton, chairman of luxury-property broker Aylesford International Estate Agents. ‘The sanctions are really beginning to bite on expensive property in London, on top of all of the tax which the government introduced in the autumn budget. It’s killed the golden goose.’”

“Slumping prices of the nation’s key exports of coal and iron ore have hit government revenues, with Australian Treasurer Joe Hockey announcing that the federal budget would not be in surplus until the end of the decade. ‘In the last six months unforeseen events have hit the Australian economy. In particular, we are now witnessing the largest fall in the terms of trade since records began in 1959,’ Hockey said in a statement.”

“The message for policymakers was clear: the party is over. ‘Broadly speaking, the balance of risks facing the Australian economy contains more substantial downside than upside uncertainties. External risks, chiefly from commodity markets, combined with speculative activity in the housing sector and uncertainties in the responsiveness of non-resource sectors, could conspire to generate a period of weak macroeconomic activity,’ the OECD said.”

“In Dongguan, a sprawling factory city, one real estate developer has cut prices by 15 percent, offered $1,600 worth of free appliances to move apartments. In Hangzhou, families that paid in advance for new apartments have occupied a stalled, half-finished complex. And in Changsha, a bustling river town where developers built a forest of fancy towers, a third of the modern office space is empty and families are mulling whether to buy in a weakening housing market or wait. For real estate, ‘the winter has not come yet, but it is coming,’ said Hu Yifan, the chief economist for Haitong Securities international division.”

“About $34 million in retail spending are lost annually due to a lack of economic development within a half mile radius of Danville Regional Medical Center. Danville City Council members learned this hard fact and more from a presentation on Danville’s housing market by Virginia-based CZB consultants. ‘It worked for 60 years that unless you screw it up they will come. That is true on the coasts and a handful of markets,’ said Charles Buki, of CBZ. That is no longer true for about 70 percent of the housing market, he added, including Danville. The main issue is that the housing market has excess supply. ‘Every place in America is struggling with this,’ he said.”

“Falling gas prices are a good thing, but falling home prices are not. Here in Houston it is real concern. Realtor Lauren Taylor says as oil prices fall, home sellers are worried about their investment. ‘I think that when the amount of people moving goes down a lot more than it is now, that’s when I have a concern,’ Taylor said.”

“Ted C. Jones is the Chief Economist Stuart Title. He says Houston added more than 120,000 jobs in 2014 and those people fueled the housing boom. The forecast for 2015’s job growth is not as strong. ‘The good news is for prospective buyers out there, you may look at a home and decide three hours later to offer a contract on it and it may not have multiple offers like they have in the past,’ Jones said.”

Bits Bucket for December 21, 2014

Post off-topic ideas, links, and Craigslist finds here.