The Volume Of Price Corrections Is Impressive
A report from Bloomberg. “U.S. apartment vacancies rose in the fourth quarter as a construction surge in pricier urban locations overshadowed rising demand for older properties in the suburbs, Reis Inc. said. Vacancies rose from the previous three months for a second straight quarter — the first time that’s happened since 2009. The surge in apartment construction since the recession has been largely confined to Class A properties, typically buildings close to city centers aimed at high-income professionals. ‘It’s taking a lot longer for new projects to lease up,’ Ryan Severino, a senior economist at Reis, said in a phone interview. ‘Vacancies are rising predominantly because a lot of shiny, sexy new Class A projects are having a harder time leasing up relative to a few years ago.’”
“Reis has recorded zero completions of new Class B and C apartments since 2012, following the addition of about 44,000 units from 2007 to 2011. Developers have delivered almost 1 million new Class A units since the beginning of 2007, according to the firm. ‘Eventually, rising vacancy rates will take the wind out of landlords’ sails and remove some of their ability to keep pushing rent growth at such a febrile pace,’ Severino said.”
New York Magazine. “The median price of a Manhattan apartment has jumped 17.3 percent from the previous year, to $1.15 million, according to the Douglas Elliman report written by Jonathan Miller — the highest it has ever been. The average price now stands at $1,948,221. It’s a marked difference from the summer, when experts began to manage the expectations of real-estate watchers. Bess Freedman of Brown Harris Stevens spoke of a developing stalemate between sellers, some of whom were getting too demanding, and buyers, who were growing tired of their powerlessness. ‘They’re just not in sync,’ she told New York back then. ‘Sellers have these unrealistic expectations … and buyers are unwilling to pay these really expensive prices.’”
“Apparently some of those sellers started listening. ‘Being smart about pricing is key. You saw that this quarter more so than any other time,’ says Diane Ramirez, CEO of Halstead Property, explaining that she saw more discounts this quarter. ‘Seven hundred apartments had price adjustments; some were small, but [the attitude] was ‘let’s get our listings sold.’ That’s what you need to keep buyers interested.’ (Leonard Steinberg, president of the brokerage Compass, adds in an email newsletter sent yesterday that ‘many agents and sellers of unrealistically priced properties [adjusted] their expectations … The volume of price corrections is impressive.’)”
The Orange County Register in California. “ReportsOnHousing.com’s first tally of the New Year for Orange County home listings shows the seasonal slowdown in selling speed was more pronounced for housing’s upper crust. It took 3.9 times longer to sell an Orange County home priced above $1 million than a cheaper residence as of Thursday – vs. six months earlier when it took 3.3 times longer to sell at the market’s high end. New escrows involving homes listed under $1 million totaled 1,445 as of last Thursday, down 41 percent from six months earlier. But at $1 million or more, the 194 new escrows were off 53 percent from six months earlier.”
“These supply-and-demand forces put ‘market time’ for homes listed under $1 million at 60 days as of last Thursday vs. 50 in July. Above $1 million, market time was 235 days last Thursday vs. 163 six months ago.”
The Denver Post in Colorado. “Metro Denver’s housing market had a record year in 2015, but it also showed signs of exhaustion in the final month, according to a report from the Denver Metro Association of Realtors. ‘December proved to be a great month for home buyers who were able to snatch up previously overpriced listings by making offers without competing offers, and without the same sense of urgency as in previous months,’ the report said.”
The Houston Business Journal in Texas. “During the energy boom, Houston homebuilders were often squeezed out by contractors, who were able to make more money working on larger luxury apartment projects. However, with dozens of new multifamily projects stalled during the oil downturn, labor has become more plentiful and cheaper for homebuilders in the Bayou City.”
“As the multifamily industry reels from low oil prices and oversupply in some neighborhoods, as many as 70 planned apartment deals have been stalled. There’s another upside for homebuilders during the oil slump: Construction costs are starting to come down as well. Although concrete and sheetrock is still stubbornly high, lumber prices are decreasing, said Richard Mazzarino, president of Mazzarino Construction and Development Ltd. ‘The cost of building is going down, and hopefully, the cost of land will, too,’ Mazzarino said. ‘The economy has been white hot for so long that materials, labor and land prices went through the roof.’”
USA Today on Nevada. “I used to think of foreclosure as chillingly final. Then I visited Las Vegas, where the slow unspooling of the great housing crash of 2007-2009 is affording free shelter to tens of thousands of people. Most are living in homes they technically still own, but on which they haven’t made a mortgage payment in months or years; others are squatting illegally in homes that were abandoned by owners who defaulted on mortgages. These homes are in real estate limbo — in foreclosure, but not actually foreclosed — because many lenders are taking their time completing the process that eventually leads to repossession and resale.”
“Jeremy Aguero, a real estate analyst, estimates there are as many as 20,000 such ’strategic squatters’ in the region. ‘Everyone here knows someone in a house who’s not paying their mortgage,’ says Dennis Smith, a housing consultant. He says a few even brag about it, ‘depending on how much they’ve had to drink.’ Mark Rowley, a small-home builder, says he knows about two dozen people who’ve been in their homes for more than two years, despite having stopped mortgage payments. Their attitude, he says: ‘We’ll move when the paperwork finally comes through.’”
“Strategic squatting invites top-this stories. At a housing conference this fall, Tisha Black-Chernine, a real estate attorney, said she had clients who’d gone seven or eight years without making mortgage payments on homes, including two worth around $5 million. Rowley recently had a beer with a guy who said he’d been living in a 10,000-square-foot house since 2008 without making a payment.”
