November 23, 2015

Once The Market Starts To Soften: ‘Get Out Of Dodge”

The Real Deal reports on New York. “Forget about aspirational pricing. Sellers serious about offloading their luxury apartments will need to slash prices to find buyers who have plenty of new development alternatives to choose from, top brokers said. After a slow start to the typically busy fall, agents said they’re just beginning to move product – and only when their sellers get real about asking prices. ‘Most sellers are absolutely not realistic,’ said Dolly Lenz, speaking at a conference hosted by the magazine Haute Living. ‘They’re buying into the hype and they’re bringing it to the brokers and saying, ‘Oh no, my apartment will sell for $15 million.’ Well, the last sale in your building was for $8 million.’”

“Some sellers appear to have gotten the message. Approximately 650 New York City listings lowered their ask by at least 5 percent over the last 30 days, compared to 419 listings in the previous 30-day period, according to StreetEasy. A total of 29 of those homes were priced at $10 million and up. ‘Everyone expected there to be an uptick in activity coming back from Labor Day but there wasn’t,’ said Compass’ Leonard Steinberg. ‘In November, all of a sudden the email inboxes are cluttered with price reductions.’”

The Miami Herald in Florida. “Pop star Pharrell Williams is giving the sale of his downtown Miami penthouse another try — and he’s willing to take a $1.6 million hit to get rid of it. The 42-year-old singer relisted the 40th-floor penthouse at Bristol Tower after more than a year off the market. According to MLS listings, Williams now wants $10.9 million for the three-floor, 10,000-square-foot crib. One drawback: Property taxes currently are about $60,000 a year.”

“Williams bought the place at the height of the real estate boom for $12.9 million. He has been trying to unload the digs for more than two years. The singer first listed it in November 2012 for a whopping $16.8 million, but the sale price melted steadily until Williams pulled it off the market a year ago.”

The Mercury News in California. “Home sales slowed in October across the Bay Area, dropping by just under 2 percent from the year before even as prices kept going up. Median sale prices rose, though not by the double-digit margins that had become routine for some parts of the region during the frenzy of the past several years. In Santa Clara County, a typical home sold for $869,000, up 6 percent from $820,000 in October 2014 — though down from $910,000 in September 2015.”

“Pleasanton-based agent Steve Mohseni, described ‘a general softening of the market. We may be heading into a period when appreciation will slow down compared to what we have been seeing over the past five years. Buyers are rethinking, pausing.’ After years of record prices, he said, ‘their willingness to pay more into new highs will be somewhat limited.’ The situation is pushing some potential sellers off the fence: ‘Once the market starts to soften, then people start thinking, ‘Well, let me get out of Dodge.’”

The Press of Atlantic City in New Jersey. “Atlantic County may be at ground zero for people losing their homes, with the nation’s highest foreclosure activity, but it is not alone in facing scores of abandoned properties. The was clear this week at the New Jersey State League of Municipalities meeting in Atlantic City, when a workshop called ‘Creative Solutions for Vacant Properties’ attracted more than 500 local government officials from all over the state. The huge crowd forced organizers to move the session from a regular room to a cavernous conference room.”

“‘In all my years of coming here I have never seen anything like this,’ said Michael L. Zumpino, CEO of the consulting firm Triad Associates, of Vineland, a member of the panel. ‘This large crowd shows it’s not just an urban city problem, it’s a problem for all of us,’ said Walter Denson of Trenton’s Housing and Economic Development office.”

The Herald Business Journal. “The symmetry of housing price history is disturbing to some investors and economists. In 2006 home prices reached their apex and began to decline. Five years later, the decline reached its nadir and prices began to recover. Next year, five years into the housing price growth, housing prices will probably have returned to their 2006 level. What bothers some analysts is the five-year down phase approximately matched by the five-year up phase. The question they are asking themselves is whether this is some sort of market cycle that will soon bring another housing bust?”

“There is general agreement that the housing price situation was a bubble. And when that housing bubble burst, it took Wall Street and the rest of us with it. Which is it, then? Is it a bubble now? Is the five-year pattern a fearful symmetry or just a coincidence?”

“There certainly is an eerie resemblance between where we are now and those pre-crash days. A report published by the New York Federal Reserve Bank in 2004 was entitled, ‘Are Home Prices The Next Bubble?’ and addressed the concerns of investors and economists at that time. What their research indicated was that, ‘A close analysis of the U. S. housing market in recent years, however, finds little basis for such concerns. The marked upturn in home prices is mostly attributable to market fundamentals. Home prices have essentially moved in line with increases in family income and declines in nominal mortgage interest rates.’”

“Researchers at the Federal Reserve Bank of San Francisco analyzed the current housing market and found that both the loan and the household financial data are encouraging. In a report entitled, ‘What’s Different About The Latest Housing Boom,’ they write that, ‘…conditions in the latest boom appear far less precarious than those in the previous episode. The current run-up exhibits a less-pronounced increase in the house price-to-rent ratio and an outright decline in the household mortgage debt-to-income ratio, a pattern that is not suggestive of a credit-fueled bubble.’”

“The Federal Reserve efforts to find a bubble definition sturdy enough to support monetary policy, though, have produced disappointing results. It is still not clear how to distinguish a bubble from a rising price environment caused by shifts in supply, demand, or both. And, worse, it is not clear what kind of Federal Reserve intervention would deflate a bubble efficiently enough to avoid widespread collateral damage throughout the economy.”

“In the end, it may be about symmetry after all. The current housing market is different from the bubble of last decade, but home prices still might stall or even decline. And because the Federal Reserve cannot really lower interest rates that are already near zero, our economy will have to respond on its own as best it can. That would be different from last time, too.”

“What haven’t changed are the imbalances in the overall economy, and in the housing market, due to wage stagnation and artificially low interest rates. Those factors provide enough symmetry with the pre-crash markets to make the prospect of a faltering housing market worrisome.”

Bits Bucket for November 23, 2015

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