February 29, 2016

A Market About Patience Or Price

Boston.com reports from Massachusetts. “If you are looking to buy a home in Cambridge, expect to struggle a bit. In a new Zillow study, Cambridge ranked as the number one sellers’ market in the Boston metro area, meaning homeowners are likely to get the price they want when they put their house on the market, and buyers are likely meet stiff competition and pay a steep price. Zillow looked at two metrics – the share of listings that have had to cut their asking prices, and the length of time homes stay on the market. Though inventory remains low around the state, places that ranked as more of a buyers’ market included: Hingham, Scituate, Plymouth, Wareham, and Marshfield.”

“‘In buyers’ markets homes are more likely to have a price cut and more likely to stay on market for a long time,’ said Zillow senior economist Aaron Terrazas. They also were further from Boston proper. ‘They tend to be out toward the Cape,’ Terrazas added.”

The Daily Chappaqua on New York. “With prices per square foot down some 20 percent for NYC’s top 100 condos since a year ago, unexpected tactics are still moving the needle at some Manhattan properties. ‘We have been very spoiled in the past few years with buildings selling out in the first few months,’ says Leonard Steinberg, president of Compass real estate-brokerage firm. ‘Now we have to get real. This is a market about patience or price.’ He that the frothiness really lies in the $10 million-and-up market. ‘Buyers at that level know there are options, and there isn’t really any urgency to close now,’ he explains.”

“‘Buyers asking for closing costs to be covered by the sponsor is sort of typical in this climate,’ says HFZ president Alicia Goldstein. Other firms have reported clients demanding concessions on mansion, title and transfer taxes — which can amount to 5 percent off the total sale price. Rather than asking for discounts or coming in with low-ball offers, ‘this is our customer’s way of saying, ‘We’d like a little something.’ says Goldstein. They just might get it.”

The Sun Sentinel in Florida. “Condominium sales sputtered in South Florida in January, and Craig Studnicky insists that was no abberation. ‘The market has slowed down a little bit,’ said Studnicky, principal of ISG World, an Aventura firm selling units across the region. ‘Nobody wants to admit that, but it has.’”

“Foreign buyers, the backbone of the Miami-Dade market, aren’t as active amid concerns about worldwide economies. Even some domestic buyers are spooked by large down-payment requirements and recent stock market woes. In Miami-Dade, builders have tempered project plans, cut prices and boosted incentives for real estate brokers as another condo glut looms there.”

“Another problem for Miami-Dade: Starting March 1, cash buyers of $1 million-plus properties in the county won’t be able to shield their identities. To combat money laundering in Miami-Dade and New York, federal authorities are temporarily requiring title insurers to reveal the actual owners behind holding companies that buy pricey properties. The names won’t be made public, but they will go into a law enforcement database. The order expires Aug. 27, though it could become permanent, some industry observers say.”

The Washington Post on Maryland. “The 3,800-square foot colonial formerly owned by Robyn and Juan Dixon — the divorced couple that acts like anything but on Bravo’s ‘Real Housewives of Potomac’ — just hit the open market after being foreclosed on in 2015. Juan and Robyn bought the three-bedroom Silver Spring home in 2002 for $725,000. Nearly 14 years later their dream house, located in the upscale Hampshire Green golf course community just outside the Beltway, is now on the market for $715,000. ‘It’s priced to sell,’ said our source in the local real estate community.”

“In the halcyon days of the housing market homes in the area — big, estate-style affairs made for entertaining and sitting on leafy one-acre lots — could sell in the million-dollar range. These days not so much. The Dixons’ financial trouble — they both filed for bankruptcy in 2013 — has been a central plot point on ‘Housewives,’ charting the couple’s joint climb out of bankruptcy. In a recent interview with OK Magazine, Robyn said she was ‘bank on track’ but not yet fully recovered. ‘It’s not perfect. It’s not where I want it,’ she said. ‘We are still dealing with repercussions from everything that’s happened to us.’”

The Reading Eagle in Pennsylvania. “There were 222 foreclosures in Berks County for the fourth quarter of 2015. According to figures released by the Berks County prothonotary’s office, that brought the yearly total to 1,067, the lowest since 2011 and a 12 percent drop from 2014. ‘While it is encouraging to see that the foreclosure trend is declining in Berks County,’ said Eva Eisenbrown, president of the Reading-Berks Association of Realtors, ‘it is still a factor. In January 2016 alone, we had 210 properties considered to be in foreclosure or pre-foreclosure.’”

“Eisenbrown said those numbers could keep Berks a buyers’ market for homes. ‘This is unfortunate for sellers, but an opportunity for buyers along with the forecast of continued low interest rates,’ Eisenbrown said.”

The Jamestown Sun in North Dakota. “Although the housing market is facing an excess in properties and increase in prices compared to last year, real estate agents in the Jamestown community remain hopeful the market will stabilize in spring. Beth Keller, president of Keller Appraisal Services in Jamestown, said after CHS announced the company wouldn’t be building a fertilizer plant in Jamestown in August, some community members, and some potential community members, no longer thought of Jamestown as a place to locate, contributing to the current number of availabile properties on the market. ‘It’s like an atomic bomb, we’re going to be scared for a while,’ she said. ‘I really think in May things will stable out again.’”

“Becky Thatcher-Keller, executive director for the Jamestown Area Chamber of Commerce, was a part of the South Central Dakota Regional Council in 2012 when the group conducted a nine-county study to determine where and if additional housing was needed in Jamestown. The study showed the Jamestown area was lacking available single-family units and multiple-family units, or townhouses, and identified a need for lower-price homes, Thatcher-Keller said.”

“Thatcher-Keller believes findings from the study are relevant today. ‘We have been able to build some housing, unfortunately it isn’t necessarily the type of housing that was needed and identified in that study,’ she said.”

Bits Bucket for February 29, 2016

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February 28, 2016

Drinking The Homebuilder Kool-Aid

A weekend topic on this Aurora Sentinel editorial from Colorado. “There’s only one thing left to do in the controversy over whether Colorado should back off requiring homebuilders to stand behind the condos they build and end so-called construction defect laws: Call it the total bull crap that it is.”

“Bull. Crap. It’s cockamamie construction bull crap that the home-builders have been using to blackmail Colorado into letting them off the hook when they build stuff that falls apart. And you’re lying to yourself, me and everyone else in Colorado if you say that there hasn’t been a past plague of crappy condos built here in the metro area, There’s been a city-full of poor suckers who got left holding the bag on the junky homes they bought.”

“Not only were there projects bursting with junk, but there were evaporating homebuilders that would claim bankruptcy under one name and reappear as a new company to do it all again. The problem was so bad that state lawmakers actually mustered the nerve to change the laws in 2007. The change made it easier to create group lawsuits against these shoddy and shady homebuilders. It did nothing to stack the deck in court in favor of homeowners saddled with buckling concrete floors and driveways, warping siding and a long list of expensive, rampant problems. It just helped to even the playing field for victims of an industry that has long owned endless numbers of city councilmen, county commissioners and state legislators.”

“Few industries like homebuilders and developers donate as heavily year after year after year into the campaigns of so many. And in many ways, they get what they pay for. For the past several years, many of these homebuilders have complained and whined that the reason they no longer build affordable condos in the Aurora-Denver metro area, is because their insurance costs too much. They say that when legislators evened the playing field, some insurance companies raised rates.”

“Maybe. But that’s because these shoddy builders had to pay for their mistakes, and then were successful at charging it back to insurance companies.”

“But here’s the real reason why this entire argument is bull crap. Builders say they haven’t been pounding nails in affordable condos because they can’t afford to, given the price of insurance to cover their shoddy mistakes. The real reason why is because ever since the economy tanked in 2007, there was no market for anything. For the past few years, rental rates have gone up faster and more seriously than gasoline prices have plummeted. While the anemic housing market has slowly been coming back to life, the market is for 1. High-end homes. 2. Apartments. And that’s exactly what builders are putting up.”

“This from Metrostudy, the industry’s communication organ in Colorado: ‘Along with trade labor shortages, the other major impediment to stronger housing growth in 2015 and into 2016 are rising home prices,’ said John Covert, Director of Metrostudy’s Denver market. ‘Strong demand for move-up buyers combined with rising costs have placed more emphasis on higher priced product over the course of the last several years. The most prominent change in the past year has been in the $400,000-$499,999 price band where 34 percent of all homes started in 2015 were concentrated. 2015 was a low water mark for new home starts below $300k, representing only 7 percent of total starts for the year.’”

“Even in Aurora, home of the three-story walk-up, hardly anybody is building condos — because the market for apartments and high-end homes is hot, and so are the margins.”

“Want more proof? Even though cities like Denver, Aurora and Lakewood drank the homebuilder Kool-Aid and wrote their own anti-construction-defect bills, those cities are building, guess what? High-end homes and apartments. If someone builds a condo, and it isn’t in Aurora or Lakewood, you’d be laughed out of town if you called it ‘affordable.’”

“Why build lower-margin condos when the market is so hot for expensive homes and easy-to-sell apartment complexes? The profits are so much better than hawking condos.”

Bits Bucket for February 28, 2016

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February 27, 2016

Bits Bucket for February 27, 2016

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February 26, 2016

A Real Sense Of The Opposite Of Optimism

It’s Friday desk clearing time for this blogger. “Generally speaking, home resales started falling from Sarasota to Naples in the last two to three months of 2015, said Denny Grimes, president of Denny Grimes & Co. in Fort Myers. ‘It’s kind of across the board,’ he said. ‘We saw sales down in Lee County 30 percent in January. We’re in the middle of a downshift in the marketplace. And it’s a good thing.’”

“He said the consumer confidence tank is ‘low on fuel.’ Part of the low confidence, he said, is ‘our fault,’ with home prices rising too quickly. ‘We have seen tremendous price increases in the last two or three years and we are pricing ourselves out of a lot of the market. You can ask for more, but buyers won’t pay it,’ Grimes said.”

“Some builders have already noticed a slowing demand for new homes, with several starting to offer incentives to entice buyers to purchase the inventory. One of the areas where that is happening is in the Immokalee Road corridor in North Naples, which has seen a surge in new construction over the past few years.”

“Developer of tall towers Extell has announced that they’re scaling back condo prices at their 80-story Lower East Side project One Manhattan Square. The pricing rollback comes alongside news of slowing sales in the city’s uber-luxury housing stock (which Extell has no small part in.) Condos in the city’s inaugural residential supertall, 432 Park Avenue, have been divided into smaller, less pricey units to spur sales. Extell relisted some One57 condos as rentals to cast a wider net. Vornado CEO Steven Roth declined to comment on the status of sales of 220 Central Park South during the company’s Q4 earnings call last week, noting that ‘[t]he market is slowing. It’s slowing for everybody. It’s slowing a little bit less for us, but of course it’s slowing for us as well.’”

“There are signs that the red-hot tech scene is slowing down in Silicon Valley. KRON Tech Trends reporter Gabe Slate learned tech stocks are down, layoffs are happening, and there will be more to come. Venture capitalists are starting to close their wallets and not invest in tech. Real estate analysts are warning the rate of growth for the housing costs in the Bay Area has surpassed where it was at right before the dot-com bust in 2001.”

“‘It sounds so dramatic to say a big bubble pop,’ said tech financial expert Erica Sandberg. ‘But it’s definitely a slowdown. And that is a fact. It is happening. People are losing their job and companies are not hiring as aggressive as they were before. There is definitely a real sense of fear that is out there, and when fear is there, the opposite of optimism, then certainly venture capitalists and any other sort of backers are going to put the brakes on.’”

“The slump in oil prices is making an impact on the Minot housing market. An average home is currently selling for around $200,000. That’s $50,000 less than it was during the peak of the oil boom. Driving through neighborhoods in Minot, you may notice multiple for sale signs. Hundreds of homes are on the market throughout the Magic City right now. ‘We’ve seen a major shift in the market,’ said Tracy Dachs, Century 21 Action Relators.”

“During the peak of the boom in 2012, Century 21 Action Realtors say they sold a total of 968 houses. At that time more than 200 rigs were in operation, the city was still recovering from the 2011 flood, and housing was extremely limited. ‘We would drive people by a dirt lot and hold up a picture saying, this is the house going on this lot, this is the house on that lot and you have two to choose from, which one do you want?’ Dachs said.”

“Moody’s said that property prices in Brazil had fallen by 5 to 20 percent in 2015 and that, according to projections, the industry will continue to be ‘under pressure’ until at least halfway through 2017. The Brazilian real estate industry has also been suffering from oversupply. Despite an ongoing reduction in the launch of new releases, the perception of a flooded market remains. Terminated contracts and poor sales have left large numbers of finished, sale-able properties on balance sheets and are only serving to prolong the downturn.”

“‘These price declines are primarily due to a sharp contraction in consumer confidence, which is based on economic uncertainty in Brazil, including the poor employment and high inflation,’ explained Cristiane Spercel, Moody’s vice president-senior analyst. Moody’s citied the liquidity of construction companies as the ‘most serious concern’ in their report. ‘We note signs of industry contraction since 2012, but the challenges for builders have been aggravated by a tighter funding availability and deterioration in real-estate prices,’ said Spercel.”

“The housing boom once fuelled loan growth in Singapore, but analysts warn that lenders in the city-state will have a tough time peddling mortgages this year as the home vacancy rate hits a record high. This chart from BMI Research shows that the vacancy rate of non-landed properties rose to 9.4% in the fourth quarter of 2015,, the highest level since at least the first quarter of 2006 when the series was first compiled.”

“‘Singapore’s real estate market is set for another year of price declines in 2016 as a middling macroeconomic outlook, subdued rental demand dynamics, the retention of market cooling measures by the government and central bank, and a gradually tighter credit environment continue to weigh,’ the report noted.”

“Rents at blue-chip housing estates are falling faster than home prices. Rents at Taikoo Shing – a housing estate targeting middle class families with household income of HK$80,000 to HK$100,000 a month – have fallen 16 per cent from their peak in October last year compared with an overall 11 per cent drop in home prices over the same period. ‘We have seen more leasing transactions record low rents on Hong Kong Island than in other districts. It reflects that middle class families are more careful in budgeting their expenses to prepare for tough times to come,’ said Wong Leung-sing, an associate director of research at Centaline Property Agency.”

“Landlords will need to react promptly by adjusting their asking rents downward if they want to find tenants before market sentiment turns worse, he said. Midland Realty chief analyst Buggle Lau Ka-fai said leasing for luxury apartments would also be affected as the stock market turbulence could dent financial institution profits, resulting in lay offs as a way of cost control. ‘Investment bankers will become less generous than before in terms of paying rents,’ he said.”

“I have been wondering about Beijing’s decision to intervene in the market since last year. What prompted policymakers to pour in trillions to prop up the bourse? Some people have argued that the incompetency of regulators and financial technocrats was a driving force. It is fair to say that some regulators are inexperienced. But are they so incompetent as to make such an elementary mistake? It wasn’t until I read Professor Zhu Ning’s book China’s Guaranteed Bubble that I was able to make sense of Beijing’s decision.”

“What do Chinese investors do when the stockmarket crashes? They cry, curse and occasionally jump out of buildings, but they’re also likely to stage protests at the gates of the Chinese securities regulator. There is a similar situation in the real estate sector. Chinese homeowners are likely to protest outside a developer’s office if it offers more discounts to new buyers or if prices drop. Some buyers even smash up the display centre and take sales staff hostage.”

“Instead of sending in the cops, local governments often act as meditator, asking property developers to compensate aggrieved buyers. Once again, social stability trumps all. The real danger of these actions is that it encourages the widespread assumption that the government will step in when things go wrong. Professor Zhu argues that unless Beijing reins in these implicit guarantees, a financial crisis is inevitable. It reminds me of the false sense of security created by the AAA ratings handed out willy-nilly to various mortgage-backed securities and collateralised debt obligations ahead of the great crash.”

“An economist and hedge-fund manager went undercover and found that Australia now has ‘one of the biggest housing bubbles in history’. Bronte Capital’s chief investment officer John Hempton and economist Jonathan Tepper toured suburbs across north-west and south-west Sydney to view housing developments and met with 20 mortgage brokers three weeks ago. They discovered that mortgage brokers were advising them to lie on loan application documents about the deposit for a house and about income, the Australian Financial Review (AFR) has reported.”

“When the pair asked banks to call their employer, ‘both reputable and disreputable brokers said banks rarely verified payslips,’ Mr Tepper wrote in a report. They also encountered developers lying about units and houses being sold in the west, the ‘epicentre’ of the housing bubble. To Mr Tepper’s surprise, some of Sydney’s poorest suburbs, such as Blacktown, Rooty Hill and Mount Druitt in Sydney’s west had properties selling from $500,000 to $700,000 - prices that are at least eight times the income of people from those areas.”

“There were more advertisements for deposit guarantees, where rather than putting a deposit down on a house you can take out an insurance contract that will pay the deposit if you default. Another shocking revelation was that the verification of documents was sometimes done by Indian call centres, according to Mr Hempton. ‘The further west I went, the more irrational it felt. Lots and lots of supply and prices that bore no resemblance to construction cost and income of people around there,’ Mr Hempton told AFR.”

“Tepper writes of getting a ride with an Uber driver who said he had his own house, had bought five investment properties in Queensland with no cash deposits, and went guarantor for his daughter who bought a $2.2 million home. His report noted that ‘over the past few years over 40 per cent of all new mortgages originated have been interest-only mortgages. This is truly Ponzi financing, where home buyers only make money if their houses keep rising in value. Paying interest only and revaluing property allows for a Ponzi dynamic. As prices rise in a Ponzi fashion, more equity allows for more deposits. This will reverse viciously when prices fall.’”

“Their research is an unrepresentative sample of all of Australia but Hempton challenges anyone to go out and start looking at the glut of property that exists in the west. ‘Go drive around western Sydney at the moment. It was pretty obvious to us there was a lot of unsold inventory.’”

Bits Bucket for February 26, 2016

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February 25, 2016

Pretty Freaking Nuts To Survival Mode

The Washington Post reports on Canada. “The daughters of wealthy Chinese Canadians who star in the reality show the ‘Ultra Rich Asian Girls of Vancouver’ pursue modelling careers, carry Birkin bags, and sip on Veuve Cliquot. And they snap up million-dollar Vancouver homes with the same level of dedication that some of us use to shop for a new pair of shoes. ‘It’s not that expensive in Richmond,’ 24-year-old Chelsea Jiang told a local news channel shortly before beginning the show in 2014. Jiang, born in Ottawa, Canada, was looking to buy a single-family home in Richmond, part of the Vancouver metro area, in addition to a luxury condo she already owned. ‘It’s really cheap and I have a budget of $2 million.’”

“As Justin McElroy, a Canadian journalist, pointed out on Twitter, the average price of a Greater Vancouver home rose as much in the past six months as it did from 1980 to 2006. (When those figures are adjusted for inflation, the trend looks even crazier. In today’s Canadian dollars, the city’s housing prices grew by only roughly $150,000 between 1980 and 2006, but shot up by $375,000 in the last six months.)”

“Many experts are blaming the surge on an influx of cash from wealthy Chinese, who are rushing to send investments out of their country as its economy slows. A torrent of money historic in its proportions is currently flowing out of China, driven by expectations of a weaker Chinese currency and an effort to hedge investments against a weaker economy. The Institute of International Finance estimates that $676 billion of capital left China through official and unofficial channels in 2015. By some accounts, it is the biggest occurrence of capital flight in history.”

The Vancity Buzz. “Kitsilano real estate records were broken on Tuesday after a home sold for $735,000 over the asking price of $3.5 million. The house at 3555 West 1st Avenue was built in 1912, is 3,400 square feet and sits on a standard 33 x 120 foot lot without a view. The selling price of $4.23 million is about $1.6 million above the lot’s assessed property value. ‘For it to go over $4 million is remarkable. I had five offers,’ Brandan Price, the real estate agent who sold the house tells Vancity Buzz. ‘These were local buyers just looking to make a shift who wanted to move into this area.’”

“‘These prices are getting pretty freaking nuts in my opinion,’ Thomas Davidoff with UBC’s Sauder School of Business tells Vancity Buzz. Davidoff says purchasing a lot for that much money is only beneficial to the buyer if they plan on developing it. Buying that Kitsilano lot for $4.2 million, in his opinion, doesn’t make much sense. ‘As a proposition for someone who’s going to live in that house and what you’re getting for four million plus – that is a ridiculous joke and that is not something that’s going to work for people who just make a living in Vancouver.’”

“Davidoff says it’s impossible to pinpoint where Vancouver’s housing market is heading next, but the risks are astronomical. ‘The uncertainty around Vancouver’s housing market is huge. I believe prices are going to keep on rocking, but at this point we’re at huge risk of a collapse too,’ he says.”

From Metro News. “With migration to Alberta slowing and hundreds of rental units set to hit the Edmonton market, 2016 could be a good year for tenants and a tough one for landlords. In the downtown alone, hundreds of purpose built rental units have or will come on stream in 2016 — the first large-scale build of such units in decades. And the units are coming available just as the market is cooling, with vacancy rates doubling over the course of 2015, landing at 4.2 per cent at the end of the year.”

“Jandip Deol, who specializes in multi-family construction projects with Colliers International, a real estate firm, said the towers about to open were commissioned at a time when the Alberta economy was demanding them. ‘It’s something they already committed to two or three years ago when the oil price was so strong and there was a plethora of people moving in,’ he said. ‘It’s really hard to pull back now.’”

From Global News. “Sign a lease to rent one Calgary home, and a big screen 55-inch LED TV is yours to keep. It’s a growing trend Alberta landlords are being forced to keep up with in order to lure tenants. Gifts and free rent are now commonplace in ads, after a dramatic shift in the rental market since oil prices dropped. ‘[In the past] you could throw an ad up with a high rent and get a bunch of calls right away,’ leasing agent Shawn Langille said. ‘You could pick your tenant and have them fight over a property.’”

“Online rental sites have seen their business spike, with a big jump in ads. ‘Roughly a 40 per cent increase from this time last year,’ RentFaster.ca’s Mark Hawkins said. ‘And then we’ve seen that price drop anywhere from 10 to 20 per cent.’”

“Experts say the next big hit to the market could come in the spring, when many leases typically come up for renewal. Plus, supply continues to increase as more Albertans are renting their homes out, as opposed to selling them at a loss. ‘Yeah, it’s bad,’ Langille said.”

The Star Phoenix. “Following a period of rapid expansion driven by high commodity prices, Saskatchewan’s economy deteriorated sharply in 2015. At the beginning of this year, it was deep in what University of Regina economics professor Jason Childs describes as the end of a commodities ’super cycle.’ ‘We’re seeing the backslide of a commodities cycle,’ Childs said. ‘All the prices were being inflated. Now all the air is being let out of the balloon and we have to shrink back down.’”

“‘We were overheating pretty good,’ the U of R economist said. ‘Housing prices were pretty scary. It was virtually impossible to find a good employee. We were seeing all of the hallmarks of an overheating economy.’”

The Regina Leader Post. “Once the province’s poster boy for economic growth, Estevan is now the canary in the coalmine, the first city to feel the full impact of the plunging price of oil. Nowhere in Saskatchewan has the slowdown in the economy — the transition from boom to bust — been more pronounced or rapid. Mayor Roy Ludwig, who served on council for 22 years and the last four years as mayor, says almost overnight the prevailing attitude has changed from buoyant optimism to hunkered down ’survival mode.’”

“‘There’s somewhat of a general malaise out there right now,’ said Ludwig in a recent interview. ‘The people who do have jobs feel very fortunate and they do feel sorry for the ones that don’t.’”

“Manpreet Sangha, the city’s economic development officer, knows that 75 building permits valued at just over $11 million were issued in the city of 13,000 in 2015. That’s down sharply from 157 permits valued at nearly $35 million in 2014. Even more dramatic was the decline in single-detached housing starts, from 72 in 2014 to only 18 in 2015. According to Canada Mortgage and Housing Corp., there were 91 multiple housing units started in 2014, compared with only four in 2015. Total housing starts in Estevan plummeted 87 per cent to 22 in 2015 from 163 in 2014.”

“After average prices on the multiple listing service increased from just under $250,000 in 2013 to about $263,000 in 2014, housing prices in 2015 slid back to 2013 average prices ($246,921). But higher priced homes have seen even larger prices decreases —$60,000 to $70,000 in some cases, Sangha said. ‘The average (vacancy rate) is 20 per cent (in April 2015), compared to an average of 5.5 per cent vacancy rate in April 2014,’ Sangha said.”

“While vacancy rates in apartments have climbed, occupancy rates in hotels have plunged during the past year. Occupancy rates, which used to exceed 90 per cent, have fallen to around 20 to 30 per cent. Like the explosion in rental housing units, the number of hotel rooms was expanding exponentially when the downturn hit the oilpatch. Two new hotels came on the market and another doubled its capacity in the last year or so, further exacerbating the falling occupancy rate. She said the city’s transient population — mainly young single males working in the oilpatch — have vacated the city. ‘Even full-time permanent workers have been laid off, so that’s another big thing that has happened in our economy.’”

Bits Bucket for February 25, 2016

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February 24, 2016

The Price For Unsellable Properties Is Just Too Damn High

The Sun Sentinel reports from Florida. “The median price for existing, single-family homes in January hit $285,000 in both Palm Beach and Broward counties, local Realtor boards said. That represented annual increases of 4 percent in Palm Beach and 8 percent in Broward. The number of home listings remains low across South Florida, and that typically gives sellers the upper hand. Even so, real estate agents say they’re noticing a shift in the market that’s giving buyers more leverage than they’ve enjoyed in the past few years. Many sellers are overpricing their properties, but savvy buyers can see the padded prices and are refusing to cave, agents say.”

“‘Sellers are being irrationally exuberant, and that’s playing into buyers’ favor,’ said Gary Lanham, an agent with Coldwell Banker in South Florida. Lanham said a Fort Lauderdale house recently was listed for $396,000 — a heady price for a two-bedroom property with no pool. Finding a few issues with the inspection report, a prospective buyer, Lanham’s client, insisted on and received a $15,000 discount off the sale price. The deal is expected to close in March. ‘Buyers have a lot of confidence right now,’ Lanham said.”

The New York Post. “Manhattan’s real estate market may be at an all-time high (median sale price: $1.15 million) — and weighted with cutthroat competition — but that doesn’t mean every single apartment is getting snapped up. No-buyer syndrome disproportionately affects very expensive properties. More than a dozen experts interviewed by The Post agree the price for most of these ‘unsellable’ properties is just too damn high.”

“‘If the apartment has been sitting on the market for more than a couple years, there’s a problem,’ says CityRealty’s director of research Gabby Warshawer. ‘The market is responding. It’s saying, ‘No!’”

The Green Valley News in Arizona. “Challenging. That’s how Ginger Kneup, with Bright Future Real Estate Research, summed up the regional and local housing market this week. She presented a similar outlook to the Sahuarita Town Council. The greater Tucson region in general – and Sahuarita in particular – continue to have a market plagued with a high number of foreclosures, a lack of demand and the stumbling block of slow job growth. Kneup said part of having so many distressed homes on the market means it’s harder for existing houses to appreciate in value.”

“In Sahuarita, the difference between the price of a resale and a new home is about $70,000, she said. So new homes in the area are competing against larger homes built only 10 years ago that haven’t appreciated, Kneup said. ‘A 2,600-square foot home should be a move-up home, but it’s not,’ she said.”

The Philadelphia Inquirer on New Jersey. “As New Jersey lawmakers consider taking over Atlantic City’s finances and asking voters to approve casino expansion to the northern part of the state, a new report paints a bleak picture of the ailing resort town’s underlying economics. Job loss is the new normal, the labor force is in ‘free fall,’ and the housing market is ‘moribund,’ according to a report by the South Jersey Economic Review, published by the William J. Hughes Center for Public Policy at Stockton University.”

“The metro area’s population declined last year for the first time since the late 1970s. Meantime, one in every 261 residential properties in Atlantic County was in some state of foreclosure in December, more than double the statewide rate and nearly five times the national rate, the report says.”

From Bloomberg. “Dale Oxley doesn’t need to hear about rising odds of a U.S. recession to dread the future. For the West Virginia homebuilder, the downturn has already arrived. ‘Everyone is going to have to tighten their belts,’ said Oxley, the 48-year-old owner of a Charleston-area construction company. ‘The next couple of years are going to be difficult.’”

“Four states — Alaska, North Dakota, West Virginia and Wyoming — are in a recession, and three others are at risk of prolonged declines, according to indexes of state economic performance tracked by Moody’s Analytics. The regions suffering the most are in the flop stage of the energy industry’s boom-to-bust cycle, and manufacturing-dependent areas hurt by a rising dollar are at risk of receding. Louisiana, New Mexico and Oklahoma are all at risk of recession, according to Moody’s. Wyoming and North Dakota’s economies have declined for at least the past 10 months, according to the Philadelphia Fed.”

“Oxley’s Modern Home Concepts built four $500,000 custom homes last year in southern West Virginia, down from five in 2014 and fewer than half 2009’s level, when the last U.S. recession ended. ‘There is not a lot of job creation and you are not creating new households,’ he said. ‘I am not optimistic in regard to our future in West Virginia.’”

From MTN News. “From good times to bad in the Bakken oil region of western North Dakota and eastern Montana — in just 15 months. Officials in Williston, North Dakota — the heart of the region — stress that their town is still open for business, but the reality of the boom and bust cycle of the nation’s oil industry is taking a toll. Over the past year and a half, the city of Williston went from the fastest growing small city in the country to a town dealing with layoffs, and nervous investors.”

“Hotel room vacancies in town are now running close to 30 percent; at the height of the boom, hotel vacancies in Williston were rare. If you were lucky enough to find a room, nightly rates of more than $300 were commonplace. A shortage of housing has flipped to a market where apartment vacancies now run around 40 percent. Department of Mineral Resources director Lynn Helms says the oil price weakness is now anticipated to last well into this year’s third quarter. ‘Operators are now even more committed to running fewer rigs as oil prices remain at very low levels,’ said Helms.”

The Casper Star Tribune in Wyoming. “Fewer listings are on the market than at this time last year, and a slightly lower number of homes have closed, Burridge said, but the average sale price of a home has actually increased. The average sale price for residential properties in Natrona County in January 2015 was $225,142, she said, and this year it’s $232,248. ‘If they’re going to sell, and they want to sell, they’re not going to be ridiculous with their pricing,’ said local Realtor and developer Lisa Burridge. ‘They’re going to be much more conservative, take a much more conservative approach and list the property at the right price to begin with.’”

“It felt like a handful of people would come in each week and tell Elizabeth Meyers they lost their jobs, they were moving out of the state and that they were leaving almost immediately. Meyers, the business manager at The Preserve at Greenway Park said that at this time last year, almost all the apartments were full. Three-bedroom apartment rent prices have fallen by 27 percent in the last year, Meyers said, and that was done just to keep The Preserve above water during Casper’s economic decline. ‘We’re trying to stay competitive enough to maintain some occupancy,’ she said.”

“Even offering a free month’s rent hasn’t restored occupancy at luxury apartments like The Preserve. The complex opened when Casper was booming and is now experiencing the busts that Casper residents know all too well. ‘I would argue — I mean, we are are the most expensive — we would argue we’re the nicest in town,’ Meyers said. ‘I think that because of that, we’ve lost a huge part of our demographic, which are the people making really good money in oil-related positions. Any of the good-paying jobs just seem to have kind of dissipated.’”

Bits Bucket for February 24, 2016

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February 23, 2016

It Was Too High, It Was Crazy

The Herald Sun reports from Australia. “Unit prices in Richmond have plummeted more than $80,000 in 12 months according to latest data, while house prices continue to skyrocket. Jellis Craig partner Elliot Gill said the price slump was the result of oversupply, with units needing a ‘point of difference’ to stop them languishing on the market. He said many modern complexes were built with more than 80 per cent of apartments identical to one another. ‘If you want to sell, there can be three or four identical properties on the market,’ he said. ‘For houses, there are many buyers for every property, and for apartments there are many properties for every buyer.’”

Bloomberg on Hong Kong. “Hong Kong’s developers are offering enticements from iPhones to wine coupons to counter the slowest home sales in at least 25 years, to no avail. Their options are now narrowing down to the one they’ve desperately sought to avoid: price cuts. The next step may be the outright price cuts that developers have long resisted because of fears that they’ll fuel expectations of steeper declines.”

“‘Obviously buyers, whether as end users or investors, are taking their time and aware that prices might go down further,’ Antonio Wu, deputy managing director at Colliers International Hong Kong, said in a phone interview. ‘There will be a lot more discounts than today. If they really want to sell, they really have to cut the price and start sales.’”

Korea Joongang Daily. “The values of about 4 percent, or 270,000, of apartments sold in the first month of the year have dropped, according to a study by the real estate information provider Budongsan 114. ‘As the government tightened the regulations on loans, housing demands have shrunk and recently the oversupply of apartments and shrinking transactions have resulted in lowering apartment values,’ said Kim Eun-jin, head of the Budongsan 114 research team. ‘The price adjustment in Daegu and North Gyeongsang was inevitable as these regions have enjoyed a continuous rise of apartment values over the years.’”

Bloomberg on Brazil. “Some of the luxury apartments built in anticipation of the 2016 summer Olympic Games are at risk of being left unsold as the housing market deteriorates in Rio de Janeiro, Mayor Eduardo Paes said in an interview. ‘The real-estate market has really cooled down,’ Paes said from his office in City Hall. ‘Ilha Pura is the bigger risk. The guys did 31 buildings all at once, and they’re going to have difficulty.’”

“In the nine years since Brazil bid for the games, the nation and the city of Rio have gone from economic boom to bust, reversing the seemingly unstoppable rise of the real-estate market. Prices in Rio are poised to fall a ‘a little bit further,’ Paes said. ‘It was too high, it was crazy.’”

The National on Dubai. “Dubai property developers are offering increasingly generous terms to clinch sales in a softening market. ‘These offers are indeed a sign that the market is getting more competitive, but we believe that it doesn’t have any particular effect on the stock,’ said Sanyalak Manibhandu, head of research at NBAD Securities. ‘These sort of deals are the sort that only the big developers are able to afford to do. Effectively, what they are doing is pricing smaller Dubai developers out of the market. We don’t expect them to offer these sort of deals on all projects, and if they find that they aren’t working then they will probably not continue with them.’”

The Copenhagen Post in Denmark. “For the first time since 2001, Copenhagen is actually losing people, according to figures from the national statistics keeper Danmarks Statistik. ‘A deciding factor behind these figures are that families with small children – who want to leave the city but are hesitant to sell their apartment and purchase a house during a recession – are now beginning to move out,’ Hans Skifter Andersen, a professor of housing and welfare at Aalborg University, told Politiken newspaper.”

The Deccan Chronicle in the UK. “A spectre is haunting London, or at least central and property-valuable parts of the city today. Central London today, its housing stock, the flats in the new luxury tower blocks, the Victorian terraces of the whole of central London are being or have been, bought up with crooked, or what is known in India as ‘black,’ money by Russians, Arabs, Indians, Pakistanis and some Chinese and Africans.”

“Here’s a fairly typical story: An Egyptian individual called Ahmed Ezz, a steel magnate of sorts was arrested soon after the ‘Arab Spring’ in that country, fined £2 billion for stealing from the state and sent to jail. Nevertheless investigative journalists from Private Eye, a Brit fortnightly, now allege that Mr Ezz’s laundered money was used through two companies registered in the non-tax-paying black money-laundering British Virgin Islands to buy one of his three wives a flat in Knightsbridge worth ‘tens of millions of pounds’ and another in an Edwardian apartment block worth £3.5 million.”

“If New York is known as the Big Apple, London should be rechristened the Big Launderette. This great laundromat has had a disastrous effect on the social fabric of Britain. House and flat prices in the whole of London have rocketed and young working people can’t afford to buy into the London housing market even at the humblest one-room or studio-flat level many tube stations away from Oxford Circus. And Central London has nothing resembling a ‘community.’ I still know people who are proud of living in Chelsea or Knights-bridge and in my crueller moments remind them that they are living in ghost towns.”