Stubborn Myths That Are Draining Life Out Of The Market
A report from Bloomberg. “Steady job growth, low mortgage rates and record apartment rents are turning millennials into homebuyers — if they can find a house. Jennifer Lan and her husband, Jared Tompkins, who are both physicians finishing residencies in Memphis, Tennessee, started hunting for their first house near her parents in Potomac, Maryland, last month and have already had to increase their budget to more than $900,000 after seeing what they would get for $800,000. ‘I don’t think I’m going to find a bargain,’ said Lan, 30. ‘I’m just hoping to find a home that’s not terribly overpriced.’”
From Mortgage News Daily. “A lot has been written over the past few weeks about the Millennial generation and what it is and is not doing in the housing market. Freddie Mac is speculating that misinformation was yet another factor keeping first-time homebuyers, the majority of which should at this point be Millennials, away from the housing market. Freddie Mac vice president Danny Gardner says that given current housing market conditions, ‘Millennials and other new households should be camping out at open houses.’”
“He cites record low interest rates, growing stability of housing markets, and that the millennial generation and growing immigrant communities are expected to produce about 1.2 million new households in each of the next ten years. Yet first-time homebuyers made up only 32 percent of primary home buyers last year compared to an average of 40 percent in the years before the housing crisis. What, he asks, will he take to get this first-timers into the market? His answer is information. The industry has to ‘drive a stake through a few stubborn myths that are draining life out of the market.’ Myths that lead potential buyers to overestimate the credit, income, and downpayment savings they need for an affordable mortgage.”
From Bloomberg. “Lenders are getting stingier when it comes to funding risky U.S. real estate developments, putting pressure on landlords in need of fresh funding to keep their projects afloat. Banks are proceeding with caution as the specter of slowing economic growth rattles financial markets and shakes investor confidence in a six-year recovery that’s helped lift property values to records.”
“A construction boom in places such as Manhattan and Miami in the past several years has led to a glut of high-end residential condos and hotels. Those types of deals are the most likely to hit snags, said Peter Sotoloff, chief investment officer at Mack Real Estate Credit Strategies. ‘The antennas are up,’ Sotoloff said. ‘The bar is much higher.’”
The Charlotte Observer in North Carolina. “A planned upscale condominium building at Fourth and Brevard streets has been canceled, with the developer citing difficulty getting enough units pre-sold to start the project. The luxury building, announced last year, was planned to total 31 stories with 174 units. Prices started in the $400,000s and ranged up to $7 million for the penthouse. ‘The marketing group for the project discovered post-launching that there is no pre-sale market of any depth for a condominium tower of this size and scale,’ a message posted on 1Brevard.com read.”
The Real Deal on Florida. “Developers of Marina Palms Yacht Club & Residences in North Miami Beach have raised commissions on the remaining units in an attempt to sell out. The 468-unit, twin-tower development has 40 unsold units remaining in the second 25-story tower. Marina Palms will pay its agents 7 percent of the full sales price on units sold with 40 percent deposits, according to a press release. That’s compared to the 6 percent commissions it was paying in stages.”
“Marina Palms joins two of Related Group’s projects that increased commissions this year. Related upped commissions to 10 percent, in addition to lowering deposit requirements, for Brickell Heights and SLS Lux. Terrazas Miami also offers 7 percent broker commissions as of a few months ago, according to a spokesperson. Most developments offer a standard 5 percent to 6 percent. Anthony Burns of DevStar said in the release that the change in commissions is a trend in the South Florida market. ‘You’re seeing other successful projects under construction with their construction financing in place that have a limited remaining inventory offer similar new incentives,’ he said.”
My Valley News in California. “Anyone who has a Temecula/Murrieta house they want to sell this year has been waiting for that ‘perfect time’ to put their home on the market and sell. Well, that moment has arrived. Traditionally (again there are always going to be exceptions) 60 percent of all home sales take place between May and August each year. The savvy seller who puts their home on the market in May is poised maximize their exposure in the marketplace. As spring turns to summer, more and more homes will enter the market, competing with buyer’s attention.”
“In 2013 we saw a spike in the local real estate market jump-starting the local economy with close to a 25 percent increase in real estate values. Multiple offers, over list price were the norm then. While many homeowners today have fallen into the trap of believing that the trend should repeat itself, there just has not been anything other than overly ambitious agents and hungry sellers fueling this dream.”
“The truth is, a huge percentage of homes that are selling are selling for significantly less than their initial list price. The longer a home sits on the market, overpriced, the less likely that they will receive a fair market offer. Buyers will feel a seller’s desperation to sell and come in with low-ball offers justifying their action with the belief that there must be something wrong with the home, otherwise it would have already have sold.”
“When pricing a home today, forget about what you think its worth. Don’t spend time looking on Zillow, Trulia or any of the other countless websites that offer an automated opinion of value. Rather work with a trusted real estate agent and carefully analyze the last 60 days of sold properties similar to yours and close to yours. At another time, I would suggest also looking at the active listings in the MLS; however today, many are so overpriced that it just skews the numbers. Remember, the value is what someone is willing to pay for it – it has nothing to do with your plans, dreams or expectations.”
