September 3, 2015

The Increasingly Common Notion That A Bubble Is Forming

The News Press reports from Florida. “Single-family-home permits spiked up sharply to 2006 levels in Cape Coral in August. Even the recent turmoil in the stock market and the global economy hasn’t deterred prospective home owners, said Bob Knight, president of Cape Coral-based Paul Homes. ‘There’s still movement forward to do the houses,’ he said. ‘The people who are talking to us aren’t even bringing it up. The key will be that it will last as long as they’re able to sell their homes up north.’”

The New York Daily News. “Most real estate developers dread stock market volatility. This one’s making bank off of it. Rather than converting the building into a high-end boutique condo, like almost every other developer has done with their properties in recent years, development giant Thor Equities, headed by Joe Sitt, decided to keep it as a rental. ‘A lot of people are renting while they wait for the market to soften a little bit,’ said the project’s listing broker, Karen Stone of Town Residential.”

“The buyers that Stone describes can comfortably afford to buy a luxury condo but they’re opting to try to outsmart the market, which has become flooded in recent months with uber luxe condo units, by holding onto their cash for just a little bit longer. Their reluctance to buy stems from the increasingly common notion that a bubble is forming in the very top end of the market. With global demand for luxury product being called into question in light of the economic volatility in countries such as China and Greece, they suspect that a long-awaited correction in the market may soon come to their aid — making that apartment they’ve been eying a whole lot cheaper.”

“‘No one wants to go in their pocket when the market’s down 500 points,’ said Andy Gerringer of the new development firm the Marketing Directors. ‘Our economy is dependent and psychologically driven by the stock market. When there’s uncertainty, people freeze. They end up staying on hold to watch the way the wind is blowing.’”

The San Francisco Business Times in California. “Justin Fichelson, one of the stars of Bravo’s ‘Million Dollar Listing San Francisco,’ weighed in on a hot topic these days: the direction of the Bay Area housing market. Given the over-sized role that new startup-driven wealth plays in Bay Area housing prices, Fichelson says it’s possible a slower pace of appreciation due to turbulence in tech stocks could actually spur more sales. (So strong is the tie between Wall Street and the fortunes of the Bay Area that a real estate agent once asked to share his outlook for Bay Area luxury home values responded, ‘You’re asking me to predict the stock market.’)”

“‘We’re definitely slowing down. Instead of seeing 30 percent appreciation, home owners may see 10 to 15 percent appreciation,’ Fichelson said, echoing Zillow’s assessment last week. ‘Initial public offerings have definitely seen a slowdown. There are not as many buyers writing checks for multi-million-dollar homes — so the high-end luxury homes will take a bit longer to sell and will most likely see some price reductions.’”

From Montana Public Radio. “The construction sector in Montana’s oil patch counties has been strong throughout the oil boom, but University of Montana economist Patrick Barkey is hesitant to predict how long that may last: ‘From the data we have, we don’t yet see any catastrophic impacts of the decline in oil prices from where they were a year ago - cut by anywhere from 50 percent to 60 percent - but really that reveals the inadequacy of our data. We are certainly hearing plenty of reports of construction projects being halted and of workers moving, but we haven’t yet seen them show up in the data. We expect some of them will be.’”

The Philadelphia Inquirer in Pennsylvania. “The developer of the luxury Parke Place townhouse project in the 1300 block of Bainbridge Street has filed for Chapter 11 bankruptcy protection but says he remains ‘100 percent committed’ to completing the work there. In an interview, Donovan Clarke, of Clarke Real Estate Development L.L.C., of Philadelphia, attributed his decision to file for Chapter 11 reorganization to a ‘timing issue’ with his lender.”

“Since Clarke unveiled the project in November 2013, three of Parke Place’s 22 4,300-square-foot units have gone to settlement, all in 2014. Those townhouses sold for $1.1 million, $1.12 million, and $1.225 million, according to Trend Multiple Listing Service. Three other sales are pending, for $1.25 million, $1.299 million, and $1.4 million. Five more townhouses are either temporarily off the market or withdrawn from the market, Trend MLS data show.”

“The units feature the open floor plan desired by young urban buyers and empty nesters. Mickey Pascarella, of Keller Williams Real Estate in Center City, said prices in Hawthorne range from $155,000 for studio-sized condos to $800,000 for a single-family home with parking. Clarke’s townhouses, though larger than many, are priced about 40 percent higher than the average, Pascarella said. ‘It was unfortunate this happened,’ Clarke said of his problem with Parke Place, ‘but I believe we have found a partner with whom we can get this done.’”

The Pioneer Press on Illinois. “When David Schuster put his home in Highland Park on the market earlier this year, he naturally hoped it would move quickly. As months passed without any nibbles, Schuster concluded that the appearance of a long-vacant house next door was putting off prospective buyers. Neighbors say the home has been empty for more than 3 years without any signs of an effort to market the property. ‘This house is holding our community hostage,’ Schuster told the Highland Park City Council in July. ‘I know this isn’t the only house that has been abandoned for a period of time, but I’ve been told by [city officials] that it is one of the longer ones in the neighborhood.’”

“But city administrators say they can’t force lending institutions to speed up the foreclosure process or sell homes that have become bank-owned after foreclosure sales. ‘They want to hang onto that property until prices recover sufficiently,’ said Joel Fontane, the city of Highland Park’s director of community development. ‘This is the shadow inventory that is being held back and slowly unwound. There are just too many of them for these banks to be willing … to just dump the properties on the market and take the hit.’”

Bits Bucket for September 3, 2015

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