February 17, 2016

A Glut At The Higher End

The Press Democrat reports from California. “Sonoma County’s median home sales price hit $555,000 in January, the highest level for any month in nine years. The median price climbed nearly 16 percent from a year earlier, according to The Press Democrat’s monthly housing report, compiled by Rick Laws, senior vice president at Pacific Union International real estate firm. It was the highest median since March 2007, when the price was $560,000. Craig Curreri, a broker associate with Pacific Union in Santa Rosa, said over the past year homes that formerly sold for $450,000 are now going for $515,000. And relatively few such homes seem to be on the market. For buyers in that price range, he said, ‘it’s brutal. It’s absolutely brutal… The people who are achieving the most success are the ones willing to get uncomfortable.’”

From Realtor.com. “Renters in some of the most exorbitantly priced U.S. cities are beginning to get a bit of much-needed relief. Manhattan rents have spiked to such highs that more and more landlords are throwing in major perks to keep tenants from fleeing to cheaper neighborhoods. Meanwhile, a flurry of new construction in downtown Denver has pitted property owners against one another as they compete for choosier residents.”

“Landlords in San Francisco, where housing prices have reached mind-boggling heights, may soon have to woo residents, as more newly constructed apartment buildings come online. San Francisco Apartment Association spokesman Charley Goss recently saw a new building in an up-and-coming area offer a free month’s rent to prospective tenants. ‘That was the first time we’ve seen that in years,’ Goss says.”

The Colorado Real Estate Journal. “Rising apartment vacancies rates continue to fuel concern that the Denver multifamily market is facing overbuilding. The fourth-quarter vacancy rate jumped by 44.6 percent from the 4.7 percent rate in the fourth quarter of 2014, according to AAMD. That is the biggest year-over-year percentage increase since the second quarter of 2009. However, most of the pain is being felt in the newer, luxury communities being built in and around downtown, said Jerry Kendall, principal of Greenwood Village-based Multifamily Capital Partners, and one of the sponsors of the AAMD report. ‘These are the movie stars of our little apartment world,’ Kendall said. ‘They are the sexy, expensive, headline-making stuff.’”

“The truth is, only so many consumers, especially millennials, can afford to pay $3 or more per square foot in rent, he said. And it could get worse, before it gets better. ‘We are at a point of time where a lot of these new communities are coming on line, adding to the existing supply,’ Kendall said. Already, many downtown landlords are offering free rent and that trend will continue, he said. Indeed, the AAMD put the ‘economic’ vacancy rate, which includes concessions and discounts, at 13.7 percent, twice the actual vacancy rate.”

“Markets with a significant number of new buildings already are showing double-digit vacancy rates, he noted. For example, Boulder, outside of the city, has a vacancy rate of 14 percent, according to the AAMD, while downtown Denver is at 11.4 percent. Northwest Denver’s vacancy rate was at 17.4 percent. ‘There is a glut at the higher end,’ Kendall said. ‘But if you remove all of the units that were built after 2010, our market is looking pretty healthy.’”

The American Banker on Florida. “There is concern that a decline in condo pricing could create loan problems similar to those that cropped up before the financial crisis. Bankers in the area, however, believe foreign investors would take the biggest hit. ‘Prices will come down in high-end luxury’ condos, says Eddy Arriola, CEO of Apollo Bank. ‘You’re going to see that it won’t hit the banks, because we didn’t finance’ those deals.”

The Weston Forum in Connecticut. “The real estate market, both locally and statewide, was a mixed bag in 2015, with some strong movement and some backsliding. Weston was the only one to have increased both its number of listings sold and median sale price in 2015. ‘I think Weston is on sale,’ said Realtor Patrick Filley of Berkshire Hathaway. ‘If you go and look at houses there, there are large discounts from what some of them were purchased for before.’”

“While Easton’s median sale price fell by less than 2%, the town sold 12.5% fewer homes this year than last. Like Redding, though, ‘There’s a lot of shadow inventory there,’ said Peg Koellmer, principal broker at Wilton independent real estate agency Realty Seven.”

The New York Post. “New York’s swankiest skyscrapers have become the new Swiss banks for the world’s richest undesirables. It’s ironic, considering that for decades Washington led the charge against the Swiss and others for facilitating money laundering through numbered bank accounts. Today, Switzerland has cleaned up its act and the ‘filthy’ rich have turned to New York City, turning it into a secrecy haven to stash their cash through the use of shell companies.”

“The United States as a whole has become a magnet for unsavory people because its real estate developers and lawyers are not legally required to know who their clients are, as Swiss banks now must. Finally, despite years of lobbying by law enforcement officials, the federal government is starting to crack down on this loophole. But secrecy should have been made illegal years ago. Not only does it hide the identity of the crooked, violent and corrupt, it makes investigations or seizures impossible. It appears, however, that the tide is turning. Cases have shown that shell companies not only conceal sleazy foreigners but also have enabled American criminals who have defrauded Medicare, embezzled from public schools, scammed the elderly and made illegal contributions to American political candidates.”

“The concern is that countries with hot money outflows are being destabilized, while countries inundated with illicit cash are developing real estate bubbles and high housing costs for ordinary residents. Growing demand to ‘out’ ownership by law enforcement officials has been ignored due to intense lobbying by the real estate, legal and accounting industries. ‘We like the money,’ said Raymond Baker, the president of Global Financial Integrity, a Washington nonprofit that tracks and condemns the illicit flow of money. ‘It’s that simple. We like the money that comes into our accounts, and we are not nearly as judgmental about it as we should be.’”

Bits Bucket for February 17, 2016

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