March 25, 2016

It’s Not A Shortage, It’s A Pricing Challenge

It’s Friday desk clearing time for this blogger. “While the nation is experiencing a housing shortage, local Realtors have a different take on the subject, especially when it comes to South Florida’s real estate. WPBF 25 News 9 a.m. anchor Stephanie Berzinski spoke to Realtor, Elizabeth Hoadley of Hoadley Donohue Real Estate to find out if that same housing shortage is happening in South Florida. ‘Personally I have not experienced a housing shortage,’ Hoadley said. ‘(Instead) it’s a pricing challenge. We have a lot of people who are desiring to cash out after the great fall,’ Hoadley said. ‘So they will put their house on the market but instead of truly wanting to sell it they want to list it and see what they can get out of it.’”

“The median price of a home in Massachusetts fell nearly 5 percent in February, pushing it to just below the $300,000 mark from $312,500 last year. Condo sales and prices followed the same pattern. While condo sales rose 26 percent during the year’s first two months, the median price fell 3.2 percent in the same period to $285,000. The biggest drop in home prices came on the Cape, with Barnstable County recording a 10 percent decline in its median price, to $315,000. On the South Shore, the median price in Plymouth County fell 3 percent, to $285,000. Condo prices fell 9 percent, to $225,000, according to The Warren Group.”

“‘With a mild winter behind us and the spring market beginning to heat up, the year is off to a very strong start,’ said Timothy M. Warren Jr., CEO of The Warren Group. ‘Though fairly moderate, the drops in median sale prices for both single-family homes and condos bring welcome relief as the state struggles with high housing costs.’”

“Despite significant declines in job creation, apartment developers have an estimated 30,000 units under construction in the Greater Houston area—including more than 1,300 in Conroe and Montgomery. There are not enough new jobs to sustain the apartment construction boom throughout the region, said Patrick Jankowski, senior VP of research for the Greater Houston Partnership. ‘We have—what looks like—a three-year supply [of apartments] without the job growth to sustain the [Greater Houston area] market,’ Jankowski said. ‘There are going to be too many units coming online.’”

“Gary Barnett, the developer who touched off a luxury-condo boom in Manhattan, will play host next month to a group of Israeli bond investors who are worried about dimming global interest in New York City’s costliest homes. Barnett’s Extell Development Co., which sold debt in Tel Aviv tied to the performance of some of its priciest condo developments in New York, saw his company’s bonds sink as low as 86 agorot on the shekel last week, with yields surging as high as 9.9 percent. It was the first sign of alarm by Israeli investors who since 2008 have financed a $2.4 billion borrowing spree by U.S. property builders.”

“‘Current Extell yields at 9 or 10 percent reflect a lot of fear and panic, but I think they better reflect the risk-return,’ said Lior Grinhouse, who manages 30 billion shekels at Psagot Investment House Ltd. in Tel Aviv. ‘It’s too early to tell if there is real damage.’”

“Apartments in more than 140 suburbs are on a confidential black list because of growing concerns about oversupply, off-the-plan sales, and, in some areas, falling prices, according to leaked documents. AMP Bank, the banking division of the largest financial services group that compiled the list, claims it is a ‘prudent’ response to managing risks of ‘over-supply,’ which could push down prices, rents and lead to defaults. Suburbs more than 10-kilometres from Sydney’s central business district, such as Homebush and Arncliffe, where there is a lot of apartment building underway, have recently been added to the list.”

“AMP is one of several big lenders circulating ‘black lists’ of suburbs where apartment buyers will face tougher terms and conditions, including increased scrutiny of their ability to pay. A recent survey by WBP Property revealed nearly half off-the-plan sales in the eight months to last August were in negative equity, which means worth less than the purchase price. Average losses were about $40,000, or about 10 per cent, between agreement to buy and pre-settlement valuation. Buyers have to bridge the gap between the purchase price and final valuation, which can result in contract breach, deposit loss and, potentially, legal action by vendors.”

“The skyrocketing Shenzhen housing market cooled off in March as transaction volumes saw a marked slowdown, signalling an abrupt turn in market sentiment. Total transactions by area in the nation’s most expensive city decreased 24 per cent to 89,400 square metres last week over the prior week, and fell 10 per cent year on year, according to China Index Academy. Over the weekend, mainland publication The Paper reported that second hand home prices were falling, citing the example of a flat that recently sold for a 2 million yuan (HK$2.4 million) discount, representing a 12 per cent cut in price, as the investor who bought the property wanted to cash out as soon as possible.”

“The Paper reported that a new project in Shenzhen’sLonghua district has set an initial selling price nearly 20 per cent cheaper than similar projects in the area. Carol Wu, China property analyst at DBS Vickers, said she expects price growth will ease in Shenzhen after pent-up demand was released over the past few months due to ‘panic buying.’ ‘Now prices have gone far beyond the level an average person can afford,’ said Wu.”

“Calgary homebuilders are reporting a slowdown - but definitely not a full-stop - in the wake of the downturn. Danelle Kaspers of Treehouse Developments – a housing contractor – is thankful the work has been continuing on. She thinks some of the work they’ve seen is speculative, but they also get people who want to take advantage of the slower market to build. ‘It was such a boom market before and prices were higher,’ she said. ‘There’s definitely been a price reduction – there definitely had been up to a 10 per cent drop in price on some of the inner city developments.’”

“Imagine your dreams of home ownership finally coming true. The bank qualifies you for a loan to buy a modest but perfect two bedroom craftsman on Beacon Hill. Then the economy tanks. You discover you owe much more in loans than your home is worth. The payments would eat up almost all of your now-reduced monthly income. You realize you’re on the verge of losing your home to foreclosure, with the thousands of dollars you’ve already made in payments vanishing into thin air. That’s what Pina Orsillo Belgrano says happened to her.”

“After eight years of struggling to keep her home, last week she received letter from the bank telling her she’d exhausted all other options, and that her home was being foreclosed. Belgrano said her experience as a homeowner was not the idea of the ‘American Dream’ she had in mind when she emigrated to the U.S. at age 16. ‘My thing was, ‘well, maybe I should explore the American Dream,’ she said, ‘which has now become a total American Nightmare.’”

“A longtime Nebraska lawyer who later served as the CEO of TierOne Bank when it became insolvent was sentenced Wednesday to an 11-year federal prison term. He was also ordered to pay a $1.2 million fine and undetermined restitution. Gilbert Lundstrom, 74, was accused by the government of causing more than $50 million in losses by concealing the dicey state of the bank’s assets as the housing bubble burst and TierOne became the biggest bank to fail in state history. He was found guilty by a jury last year of 12 of 13 counts in a bank-fraud case.”

“During his three-week trial, subordinates of Lundstrom said he created fake accounts to conceal bad loans made to real estate developers as the housing boom was about to become a housing bust. ‘Do not see me as an evil man. I never intended to hurt anyone,’ Lundstrom told the judge, explaining that he never expected the bank to become insolvent and put employees out of work. ‘I truly believed that the market would turn around and we’d get out of this together.’”

Bits Bucket for March 25, 2016

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