January 28, 2016

Where Trees Don’t Grow To Heaven

A report from the Real Deal on New York. “Chinese investors only really started piling into New York’s commercial real estate market two years ago, and The Real Deal proclaimed 2015 the ‘year of the Chinese investor.’ But now, a growing number of developers argue the party may already be over. ‘We should be looking for other sources of capital over the next few years,’ Jeff Blau, CEO of the Related Companies, said at a 2016 real estate outlook conference hosted by ULI New York Wednesday morning. Related received bids from all over the world to recapitalize the first Hudson Yards tower by Tuesday, Blau said, but Chinese investors were notably absent. ‘We got probably 10 bids to recap, but no Chinese,’ he said.”

“Leslie Himmel, a principal at Himmel + Meringoff Properties, suggested that a slowdown in luxury apartment sales to foreigners could doom condo projects and ultimately spill over into the office market, pushing down prices. ‘Are we going to go back to basics,’ she said, ‘where trees don’t grow to heaven and where we will be able to buy at a four, or five or six cap?’”

The Los Angeles Times on Texas. “Of 40,000 estimated jobs lost in the oil and gas sector in the Houston area last year, many were on the west side, including about 13,000 white-collar professionals. On the west side, luxury town homes sit empty, and million-dollar homes that once sold within 48 hours linger on the market weeks later. Clark Martinson, general manager of the Energy Corridor District, has friends who have taken early retirement, sold summer homes or unloaded their homes here and moved into rentals. ‘People were happy, living fat, and now it’s leaner,’ he said.”

“Doug Poteet, an offshore engineer, complained that ‘massive layoffs’ have forced friends with decades of experience in the oil industry to go to work for UPS, Uber and car dealerships. ‘If this goes on another year, you’re going to start to see foreclosures,’ he said.”

WVVA on West Virginia. “As the coal industry declines and jobs begin to disappear, housing markets in southern West Virginia feel the strain. Raleigh County is no exception. ‘800 houses on the market, real estate for sale, and what does that tell you? A lot of people are leaving. I know one public service district here locally has 97 empty houses,’says Dave Tolliver, Raleigh County Commission president.”

“The risks for the housing market lie in foreclosures as money dries up but also in the amount of houses popping up for sale. ‘Typically when someone gets laid off and they don’t have a chance of being called back to work, they’ll try to get their house on the market and get it sold. Obviously if too many come on the market, supply and demand kicks in and that pushes the prices down,’ says Mike Tyree, broker owner at Century 21 First Choice.”

KFYR TV on North Dakota. “After several years of rapidly increasing home prices in the Bismarck-Mandan area, prices are now stabilizing. The area is now in what one realtor describes as a corrective market. Alliance Real Estate’s Patsy Chapman says this correction began about 18 months ago. ‘When the market is escalating, it just seems like a lot of people have buyer’s remorse later on. This time, they’re able to step back and give a little more thought to their purchase, so I think it’s a win for everyone,’ Chapman said.”

KTNV in Nevada. “A vacant store that had recently been turned into a ‘homeless condo’ according to neighbors is now boarded up. Clark County sent crews out to secure the property just days after Action News contacted them about the problem that nearby businesses say has been going on for a month. Clark County Commissioner Chris Giunchigliani says she sees the problem all over the valley, including in many vacant homes. ‘If you think about it in housing, you’ve got so many out of state property owners or banks that don’t give a hoot,’ Giunchigliani said.”

From CBS News. “Back-stopping the nation’s banking system was the top federal priority during the height of the 2008 financial crisis. But out of the $475 billion that Congress authorized for the Troubled Asset Relief Program (TARP), $46 billion was supposed to help millions of struggling families avoid foreclosure. In 2013, Christy Goldsmith Romero, special inspector general for TARP, warned that homeowners were defaulting on their modified loans at an ‘alarming rate.’ In the IG’s most recent quarterly report to Congress in September 2015, the rate of default on these reset mortgages increased greatly over time.”

“For borrowers who first sought mortgage relief under HAMP when the program was launched in 2009, the redefault rate is nearly 53 percent. Overall, more than a third of people who have participated in the program over its lifetime have redefaulted. ‘The longer a homeowner remains in HAMP, the more likely he or she is to redefault out of the program,’ Romero’s office concluded.”

“‘Nobody wants to deal with the reality that these mortgage modifications were not affordable long term,’ said Kathleen Engel, a research professor at Suffolk University Law School in Boston and author of ‘The Subprime Virus: Reckless Credit, Regulatory Failure and Next Steps.’ Said Engel: ‘[The mortgage modifications] were all predicated on the property values appreciating in value, but they actually declined.’”

Bits Bucket for January 28, 2016

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