On The Downward Slope Of The Peak
A report from the South Florida Business Journal. “Many of South Florida’s leading condo experts said a slowdown in sales will likely prevent some projects from breaking ground, but the long term view for Miami’s condo market remains positive and another meltdown doesn’t appear imminent. The region’s leading condo builders and designers acknowledged that the sales pace for new units has slowed, and it appears the strengthening of the dollar against foreign currencies is to blame. Kevin Malony, principal of residential developer Property Markets Group, said nine months ago he spoke with a contractor who had nine jobs under contract, but he recently spoke to that contractor and he’s down to three jobs because some projects fell through. Still, he’s not worried about the market.”
“‘You are not in an economy where real estate in Miami will have a downturn, unless you believe we will have a national housing crisis,’ Malony said. ‘There’s a lot of stuff that isn’t going to get built. The first-time developers who are building in fringe areas, a lot of those won’t go through pre-sales.’”
“According to CraneSpotters.com, there are 16 condo projects in South Florida that are no longer proceeding as planned because they were canceled, went back to the drawing board with their plans, or converted to apartments. ‘If I have any concerns about the market today it has nothing to do with the condo inventory,’ said Anthony Graziano, senior managing director, Integra Realty Resources. ‘The biggest risk is rental inventory and supply pipeline; not at the city level but at county level with the amount of rentals under construction and the rent they expect [to charge]. The average rent downtown is $2,500 to $3,000 per month and that is a big number. You need to count on serious high wage employment growth to make that.’”
The Advertiser in Louisiana. “Falling oil prices may have landed squarely on the local housing market, sales figures for October suggest, with the number of home sales plunging in October. Bill Bacque, chairman of the Realtor Association Multiple Listing Service, said that home buyers may have found their best opportunity for prices, with available home choices increasing, demand sinking and interest rates projected to climb next month. ‘Realistic pricing is certainly becoming more important in attracting buyers,’ Bacque said in his monthly report on the market.”
“‘It is both logical and prudent to conclude from the past three-month’s numbers that our local economic woes brought on by the challenges faced by our oil industry is beginning to show its effect in our housing sector,’ Bacque said.”
The Houston Chronicle in Texas. “Builder Gary Tesch senses a growing economic skittishness in some of the Houston neighborhoods where his company builds houses. Prospective buyers, he said, are visiting model homes three or four times before signing a contract. ‘The buying process has elongated for the buyers out there today,’ said Tesch, president of McGuyer Homebuilders. ‘There’s competition. There are choices. There’s opportunity out there for buyers. They’re seeing the headlines of what’s going to happen in Houston and oil prices. They’re thinking, are they better off waiting or pulling the trigger?’”
“Compared with this time last year, many seem to be waiting. Sales of newly built homes were off sharply in September, with the number of closings falling 27 percent from 2014, a monthly report from housing research firm Metrostudy shows. ‘This is kind of the sign the market has peaked and we’re on the downward slope of that peak, but we’ll still be able to sell lots of houses,’ said Scott Davis, Metrostudy’s Houston regional director, adding that closings for the year are flat.”
“David Weekley Homes recently promoted a $30,000 ‘decorator allowance’ on some of its homes in Cinco Ranch that sold for $350,000 and up. Through the end of the year, McGuyer Homebuilder brands Coventry Homes and Plantation Homes are offering buyers up to $50,000 toward closing costs or upgrades when buying a recently completed or under-construction home in communities throughout this area. In another indication of the slowing market, the average cancellation rate jumped to 26 percent in September. A cancellation is when a buyer backs out of a contract before closing. Typically, the cancellation rate is below 20 percent.”
The Orange County Register in California. “For two years, Orange County’s new-home market soared. Then sales dropped. According to figures from data firm CoreLogic, new home sales have declined year-over-year in Orange County for 10 straight months, with volume down 21 percent. It could be that Orange County builders are victims of their own success, experts said. New home prices also may have gotten too high, even for Orange County, the region’s priciest housing market.”
“And purchases by Chinese buyers, who made up a significant portion of new home buyers in recent years, are starting to wane following currency and stock market volatility in their country. ‘I’m seeing slower sales at the higher price point pretty much everywhere,’ said John Burns, an Irvine-based housing consultant. ‘And the Orange County new home market is heavily skewed to million-dollar homes.’”
“The price gap between resale and new homes this year is $250,000, according to CoreLogic. For some buyers, that can mean a 20 percent to 25 percent down payment on a new home, vs. paying 30 percent to 35 percent down on an existing home, said Russ Valone, CEO of MarketPointe Realty Advisors, a new home market analysis firm. ‘The gap between the resale market values and the new home market has widened considerably,’ Valone said. ‘A lot of people are going, ‘Nah … I’m not going to buy a new home.’”
“Rising land costs – as high as $3 million to $4 million an acre for finished lots in some parts of Orange County – also are pushing up new home prices, added Mike Balsamo, chief executive of the Building Industry Association-Orange County. ‘Land prices are forcing builders to build too large of a home on too small of a lot at too high of a price, and that’s definitely meeting some resistance,’ said Mark Boud, president of Real Estate Economics in San Clemente.”
