April 7, 2016

Sellers Have To Find A Way To Become More Flexible

WMTW reports from Maine. “The real estate market is on fire in Maine’s largest city. In many cases, homes are being snapped up even before they hit the market. Some say the market conditions are mimicking that of 2006. In the desirable east-end section of Portland, everything is going faster than it can be listed. The broker for a building being converted into 10 condominium units said five of the units were sold even before they hit the market. ‘Literally like within 72 hours of hitting go online, we had five units under contract within 72 hours. Now, even if you go back one year, that was not happening then,’ said Tom Landry of Benchmark Residential & Investment.”

“Low interest rates and low inventory are helping fuel the frenzy. Elizabeth Freeman is one of those home buyers who admits she didn’t act fast enough and lost out on a few properties she liked. ‘It’s hard in the hot neighborhoods to find something that’s not only reasonably priced or somewhat, and if it is, it’s gone in a day or two. So yeah, it’s a tough market right now,’ Freeman said.”

The Boston Globe in Massachusetts. “There’s a bit of good news for renters stretching to afford Greater Boston’s sky-high housing market: At least it’s not getting worse. Monthly rents barely increased in the first quarter of 2016, according to a report, as a wave of new apartment buildings competed for tenants. Winter is often a soft period, said Lauren Jezienicki, vice president of Bozzuto Development Group, which builds and manages apartment buildings in the area. But this winter was softer than usual. ‘There have been more concessions being offered,’ Jezienicki said. ‘I think a lot of it is due to the new supply coming on line.’”

The Real Deal on New York. “So this is what a ‘penthouse correction’ looks like? Of the 261 penthouse units for sale in Manhattan as of April 1, more than 35 percent of them had price chops since being listed, according to data compiled by listings portal StreetEasy at The Real Deal’s request. The median penthouse price was $6.7 million, and the average discount was nearly 10 percent, the analysis found.”

“The steepest cut was at Walker Tower, where the 5,995-square foot penthouse is now asking $55 million, down from $70 million, a 21.4 percent reduction. The recent cuts shouldn’t be a total surprise, given the growing sense that Manhattan’s ultra-luxury residential market is saturated and experiencing a slowdown amid global economic uncertainty. The overall market dynamic has also shifted in buyers’ favor, particularly on the high end. ‘Sellers have to find themselves a way to become more flexible,’ said Brown Harris Stevens’ Kathy Sloane. ‘It’s a buyers’ market and buyers are saying, ‘Fine, we won’t bid.’”

CNBC on South Carolina. “A sharp drop in vacation home sales last year may just be the tip of the iceberg. With the nation’s political future uncertain, real estate agents say buyers are leery of the economy and more hesitant to put money down on a discretionary purchase like a vacation home. In Hilton Head, South Carolina, real estate agent James Wedgeworth said the lower end of the vacation home market is still good, but anything over $1 million sits. And there is a lot of high-end product available. ‘We’ve got more supply than you can wave a stick at. We’re running 18-months supply,’ Wedgeworth said, referring to the high end of the housing scale.”

The Daily Sentinel in Colorado. “Prospects for rapid growth in the local real estate market weakened after Grand Junction endured the third-biggest drop in healthy market conditions of any city in the country, according to the index published last week by Nationwide Economics. The study considers employment, for example, because job growth normally produces a rise in incomes and enables buyers to buy new homes, said David Berson, the index’s chief economist. Unemployment insurance claims rose dramatically in the past six months in part because of layoffs at several large Mesa County employers, the Mesa County Workforce Center reported.”

“Layoffs reported at Halliburton in the fourth quarter last year, and at United Parcel Service and GE Oil and Gas earlier this year, raised alarms about the health condition of the city’s housing market, index economists concluded. ‘In response to a challenging market environment,’ GE Oil and Gas, for example, restructured in February to reduce costs, said Lindsey Benton, a company spokeswoman. ‘As a result, we … decided to close the Grand Junction, Colorado, office.’”

“Like Grand Junction, however, Boulder also saw its relatively healthy real estate market fall ill, but for a different reason. High mortgage costs in the Boulder area were the primary reason Nationwide lowered the fast-growing city’s index score from 0 to -1 after the first quarter. According to the index, the home city of the University of Colorado weathered the seventh- largest decline in healthy market conditions of all 400 cities considered.”

The Houston Business Journal in Texas. “Houston’s home foreclosure rate has been falling in recent years, but low oil prices could mean rising foreclosures in the Bayou City. However, foreclosure activity is rising in Texas, driven by weakening housing markets in former oil boom towns like Midland. The number of foreclosure starts in 2015 jumped 15.7 percent statewide and as high as 36 percent in cities like Midland, according to RealtyTrac.”

“Caroline Allison, a Houston Realtor with Keller Williams Metropolitan, fears the impact of falling oil prices — job losses leading to home losses — could ripple out from the oil patch to larger oil-dependent markets like Houston. Allison said she has noticed an uptick in the number of foreclosure listings in recent months and the number of clients looking to downsize their homes.”

“One of Allison’s clients, she said, is a former energy employee who was making $800,000 a year. The client, whom Allison didn’t identify, was laid off and found himself having to sell his multimillion-dollar home in The Woodlands and move into a smaller home, she said. ‘I’m seeing some deep downsizing,’ Allison said. ‘People have hit hard times and they’re trying to hold on.’”

“Some of Allison’s clients who have been laid off don’t want to give up their standard of living and their home. However, the sooner they make a decision, the more of their wealth they can preserve, she said. ‘You don’t want to burn through your retirement savings until you have no choice but to sell the house or let it go to auction,’ Allison said. ‘Most people end up in foreclosure because they were procrastinating.’”

Investors Will Have To Suck Up A Fall In Prices

The Daily Telegraph reports from Australia. “Sydney apartment buyers could be in for a shock, experts fear, as the huge number of high-rise flats coming on to the market puts downward pressure on prices. Industry insiders say there are too many inner-city apartments being built, with people buying off the plan at risk of purchasing properties that will be worth less than their sale prices. About 32,000 apartments are under construction and another 23,000 have development approval. BIS Shrapnel managing director Rob Mellor said people buying off the plan are most at risk. Developers often price properties at what they estimate they will be worth by the time they are built in two or three years, but those forecasts can be overly optimistic, Mr Mellor said. ‘These properties are often sold at a premium, based on the past pattern of high price growth, but that growth isn’t going to be there going ahead,’ he said.”

“A price drop won’t put off young investor Felicia Markos, 21, from Alfords Point. ‘I’m not worried too much (about the value dropping) because I don’t want to sell straight away,’ she said.”

The Sydney Morning Herald. “Sydneysiders looking to shelter them from the unseasonal heat could well find it in the shadow of one of the record number of cranes across towering over the city’s skylines. Property and construction group Rider Levett Bucknall’s latest Crane Index report shows there are 288 cranes looming over the greater Sydney region, stretching from the CBD to Parramatta in the west, Mascot in the south and even to the leafy lower north shore. The current boom is unprecedented, with more cranes looming over the city in any time since RLB launched its index in August 2012 and a 35 per cent increase in numbers in the past six months alone.”

“But with signs the housing market is cooling, will the construction boom last? February data on housing approvals indicates a continuing fall in NSW from June 2015, lobby group Urban Taskforce has reported. ‘While 5000 approvals in a month is still a healthy number, the fact that there has been a drop of 900 approvals indicates a worrying trend,’ Urban Taskforce chief executive Chris Johnson said.”

“But RLB NSW managing director Matthew Harris said he is yet to see signs of a slowdown. ‘Despite what you read, [it] refuses to cool down,’ he said. ‘There has been a rise of 44 per cent in residential work done to more than $10 billion in 2015 and the momentum does not seem to be slowing,’ he said.”

From News Limited. “Renters in Melbourne and Brisbane right now are like kids in a candy store, they can basically have whatever they want, almost for whatever price they want. Renters have the power in the apartment market right now because there’s a huge oversupply of dwellings and investors are forced to bring down prices to compete with others who are also trying to fill their empty properties.”

“BIS Shrapnel managing director Robert Mellor said there were record levels of apartment construction in the last 18 months. He said investors will just have to suck up a fall in rental prices over the next few years. Those with older apartments will feel the burden of the oversupply the worst and Mr Mellor said the price on those had to be dropped even more to compete with modern-style apartments. ‘Unless someone does some work on those apartments to do them up, they’ll be the ones to suffer the most,’ he said.”

The New Daily. “It’s good times for renters with annual rents across Australia falling for the first time in more than two decades, according to statistics collated by CoreLogic RP Data. The slide was the first since the company had begun collecting annual rent figures in 1995, said its Australian head of research Cameron Kusher. Angie Zigomanis, senior manager of residential property at BIS Shrapnel, said new building was beginning to outstrip population growth in some areas. He said some landlords were being forced to woo potential tenants by offering ‘a few items of furniture, a free refrigerator or even a Foxtel subscription.’”

“‘We’re getting to the point now in a lot of markets where vacancy rates have crept up,’ he said.”

The Sunday Times. “Perth’s tanking property market has hit the Barnett Government’s fire sale of publicly owned land, with some properties being sold for multimillion-dollar losses. An investigation by The Sunday Times found 12 of the 23 properties sold by the Department of Lands in the past year were either sold at a loss or under the asking price. A 161.7ha farming lot in Neergabby, near Gingin, sold for $300,000 last September — $50,000 less than what it was bought for 13 years ago.”

“The sales program was launched two years ago to reduce ballooning State Government debt, which is forecast to peak at $39 billion. Lands Minister Terry Redman conceded the recent land asset sales ‘reflect the current state of the real estate market in WA.’ He also insisted the program was not just about revenue raising, insisting it was also ‘a great opportunity to refresh and revitalise our city and state.’”

“Opposition treasury spokesman Ben Wyatt said he was concerned the losses signalled bigger sites up for grabs would also sell for reduced prices. ‘When you’re selling a significant amount of land for less than what it was purchased for you know there is a sense of desperation in the Government’s plan,’ he said.”

“Curtin economics and ­finance professor Steven Rowley said given the apartment oversupply, developers were unlikely to spend big on sites with complications around the CBD. ‘I think (the scheme) is to plug the hole in the Budget. It’s necessity rather than any thought about whether it’s a good time or bad time to sell,’ Dr Rowley said.”