February 10, 2016

An Oversupply Of Luxury Inventory

The Visalia Times Delta reports from California. “The Visalia Planning Commission will consider whether to grant a three-year extension to build a 219-home subdivision on the city’s west side. Members of the commission approved a tentative map for the planned Lowery Ranch subdivision back in March 2014, but the project never moved forward. Last year, the developers successfully received a one-year extension on that approval that will run out late next month. The delay in the planned Lowry Ranch development reportedly was due to the hit the local housing market took in the recent recession.”

“‘The reason for the request is that the housing market, while recovering somewhat, has not returned to its full strength yet,’ states a letter sent earlier this month to the commission by Visalia’s C.J. Ritchie Farms, which is working to subdivide the 72.5-acre parcel and turn most of the property into single-family home sites. It goes on to say that the developers expect to be ‘ready to go’ once the current inventory of available homes in the Visalia area is reduced.”

From Multi-Housing News. “Founded in 1983, Bethesda, Md.-based ROSS Cos. was the vision of Scott and Beth Ross, with the goal of becoming a leading owner, operator and renovator of multifamily assets in the Mid-Atlantic region area. MHN got a chance to catch up with the ROSS Cos. duo to see what’s in store for multifamily in 2016 and how the company adjusts to the continuously evolving state of the industry. MHN: What are some challenges coming up in the multifamily sector? Are there any supply/demand or pricing risks? Scott: With regards to D.C., we’re seeing an oversupply in the short run of new high-rent Class A units with small square footage.”

The Temple News on Pennsylvania. “Property values in and around Main Campus experienced the biggest jump in price increase in Philadelphia last year. The number and price of houses being sold has increased gradually since 2012, but hit its peak in 2015. Despite the recent sales spike, some are concerned that the price increase is creating a housing bubble, very similar to the one in 2007. ‘It is a classic situation with a bubble, when you have that many for-rent signs,’ said David Elesh, an associate professor of sociology. ‘You have a lot of vacant units. The costs don’t disappear and you pretty much hit a limit with the amount of students.’”

“‘Ultimately, you are going to see more abandonment. If they cannot rent those places or sell those places then they cannot take the strain on their finances,’ he said.”

The Aspen Times in Colorado. “Two reports issued last week showed a drop in January property sales volume in Aspen compared with January 2015. The city of Aspen’s Finance Department reported that its real estate transfer tax collections were down 69 percent for the affordable-housing fund last month, and down 67 percent for the Wheeler Opera House portion.”

“Also, the city’s collection of $140,258 in Wheeler transfer tax payments was 52 percent lower than the $293,000 budgeted for January. The housing portion reaped $253,985, 53 percent below the budget of $546,000, the report shows. Additionally, property broker Chris Klug’s newsletter noted that Aspen had $24.29 million in total sales volume last month, compared with $91.535 million in January 2015.”

The Houston Business Journal in Texas. “Houston home prices hit a new peak in 2015, but are now falling amid the oil slump, according to a new national report. RealtyTrac released its 2015 U.S. home sales report, which found that more than a third of 87 housing markets nationally — including Houston — hit all-time home price highs in 2015. However, Houston saw home sales prices start to slip in the fourth quarter of 2015, according to RealtyTrac. Some housing experts say Houston is most at risk nationally for falling home prices amid the oil slump.”

“Eight U.S. cities — including Houston — saw year-over-year declines in the median home sales price in December. The Bayou City was the largest of these cities nationally to post a decrease in December, according to RealtyTrac.”

From Greenwich Time in Connecticut. “It’s an economic concept that not even the Greenwich housing market can escape: when supply outstrips demand, prices drop. The average sales price for a Greenwich home fell 13 percent in the fourth quarter compared with a year ago, Douglas Elliman Real Estate said in a report released last week. The luxury home market, defined by the New York-based broker as anything the top 10 percent with the highest asking price, fared even worse, with a decline of 23 percent. In Greenwich, that’s anything listed north of about $4.5 million, including numerous eight-digit outliers like the $26 million former-Mel Gibson estate at 124 Old Mill Road, which has been on the market for well over a year.”

“‘There is an oversupply of luxury inventory in Greenwich,’ said Rob Vannucchi, executive vice president for Connecticut at Douglas Elliman. ‘Anytime supply is greater than demand, pricing will go down, and that’s what we’ve been seeing for some time now … the ultra-high end market is certainly not doing as well as we would hope.’”

“Vannucchi said the environment is not unique to Greenwich. Many of the affluent bedroom communities surrounding New York City — including Westchester County and Long Island — where former-city dwellers have historically moved to put their kids in good public schools, are facing the same issue as Greenwich: too many luxury single family homes, too few condos.”

Bits Bucket for February 10, 2016

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