Most Were Greedy And Ran For The Roses
KION reports from California. “High demand landed Santa Cruz on the number 17 spot on realtor.com’s top 20 hottest U.S. housing markets. ‘The demand is being driven by Silicon Valley from people who come over here looking for second homes,’ said Candie Noel, 2016 president of the Santa Cruz County Association of REALTORS. ‘It is more affordable and people think it’s a bargain and it is.’”
“Agents say compared to last year there are 125 fewer homes on the market this year because people are holding onto their properties. ‘People are just now getting equity in their homes,’ said Noel. ‘People have been under water in their homes, some still are. So they really don’t have the equity in their home for the move up sale.’”
GoLocalProv in Massachusetts. “If you think the Great Recession’s housing problems are over, you are wrong. Worcester’s foreclosure crisis has been bad and is now getting worse. Despite many aspects of the regional economy picking up, those homeowners who are underwater are still facing significant problems despite all the federal and state programs. ‘So November represents the 20th consecutive month increase - we never got as low as the peak of the 1990’s crisis, but we are approaching the height of 2011 now,’ said Grace Ross, former candidate for Governor and leading housing advocate. ‘The crisis has spread out through every community in Massachusetts. Worcester County is again hardest hit.’”
“Advocates this week organized to help the Alvarez Family who has been fighting for their home since 2009 when they were illegally foreclosed on. The Alvarez family has been attempting to purchase their home back since initially faced with the foreclosure. ‘The longstanding eviction brought by Freddie Mac comes as a surprise to the Alvarez family as they have been in negotiation to purchase their home back for months now. The eviction also comes as a surprise because they have paid use and occupancy (rent) every month as agreed upon,’ according to Lori Cairns, Worcester Anti Foreclosure Team.”
The Citizen Times in North Carolina. “Based on forest regrowth and timber supply, life should be good for lumber companies in the Appalachian Mountains. But that hasn’t held true in recent years, though there is hope for the future. ‘In general, we’ve seen a 30 percent decline in pricing from the start of 2015 in a number of grades (of wood),’ said Fred Hardin, a forester and leading salesman at Gilkey Lumber.”
“A weakening of overseas markets, such as those in China and Vietnam, is a primary cause, he said. The domestic demand for hardwood flooring also has dropped dramatically since last year and the beginning of this one, Hardin said. Thin profit margins and high capital costs have added to hardships that hit the industry when the Great Recession drove down housing construction. That meant demand declined for wood to build houses and products people put into their homes, Hardin said. ‘Pricing also went down,’ Hardin said. ‘People didn’t have the money’ to pay what had been standard costs for products.”
“Attaining the all-time highs the industry enjoyed in 1999-2000, when it generated 13 billion board feet, isn’t likely, said Tom Inman, president of Appalachian Hardwood Manufacturers. But ‘trees are still growing and we’re banking for the future,’ Inman said. ‘We’re using less than 1 percent of our standing inventory of merchantable trees in the forest every year,’ he said. ‘There are so many trees, we can’t keep up.’”
The Wall Street Journal on New York. “It once seemed as if prices on superluxury apartments had nowhere to go but up in a stretch of Midtown Manhattan known as Billionaire’s Row. But with at least six towers on the market or under development on and around West 57th Street, there are signs that prices are coming under pressure as the supply of expensive condominiums increases. At One57, a four-bedroom condo bought by a European investor for $20.3 million in April is about to sell for a loss of more than $1 million.”
“‘For sure we weren’t able to sell it for what he bought it for,’ said James C. Cox Jr., a broker with Compass who along with colleague Frank Giordano had listed the sprawling condo.”
“Most sellers are asking for millions of dollars more than they paid, but a condo on the 62nd floor that cost $31.7 million is now listed at just under $30 million after being offered for as much as $38.9 million last year. ‘Just because you buy a piece of New York real estate doesn’t mean you have a God-given promise to make a profit,’ said Donna Olshan a broker who tracks the luxury market. ‘There is plenty of competition and more new projects are coming on the market.’”
The Crosby Journal in North Dakota. “While vacancy rates in Tioga soar, rents stubbornly sit well above rates normal for a rural community with a sparse population. With nearly half of rental units empty, a lot of people are wondering why rents haven’t fallen to meet the affordable range. Dean Dovolis, an architect who worked on the Annabelle Homes and Cenex station projects, said a collapse could be just around the corner.”
“While it may mean affordable rents, he said the situation could be ‘brutal.’ Dovolis, who has a master’s degree from Harvard, said when the boom hit, developers rushed to get financing for their projects and capitalize on $3000 per month apartments. ‘They were willing to accept risky terms, such as five-year paybacks and high interest rates. Most were greedy and ran for the roses….They built a lot of pro forma on $100 per barrel oil,’ he said.”
“This leaves them locked into loan terms that cannot be satisfied without high rents. It may explain why housing owners have been unwilling to lower rents to normal levels and have aggressively lobbied to shut down man camps. If rentals continue to see vacancy rates climb, the result could be widespread foreclosures. Apartments, townhomes, and other rental properties will then be sold at auction. New owners will be in a much better position to lower rents. Corbin Graham of Graham Construction, owner of the Mainstay Suites, said amortization is about one-third here what it is in your typical American housing market and construction costs are very high.”
“He said the high rents have little to do with greed and everything to do with what an owner needs to charge to make any profit at all. ‘With the low amortization they are running bone thin,’ Graham said.”
“Graham said developers will probably pursue other options before reaching foreclosure, and these options are preferred by lenders and developers. Renegotiating loan terms is one option. So, the ‘apartcalypse’ is not certain to unfold soon or at all. Graham said the rental market will eventually normalize but there are a lot of ways that could play out. He also points out there’s still a lot of business going on and the situation doesn’t reflect the bust of the 1980s.”
