The Housing Bubble

A report from Banking Exchange. “Did you know that a tad over one out of five home sales typically don’t appear on federal anti-money-laundering radar? That’s because they are ‘all-cash’ deals—that is, purchases involving no lender financing—and thus not covered by any of the mainstream BSA/AML programs administered by FinCEN and federal banking regulators. ‘Currently, if a real estate transaction takes place without a mortgage issued by a bank or a mortgage broker, then none of the parties involved in the transaction are subject to AML program requirements,’ Jennifer Shasky Calvery, director of the Financial Crimes Enforcement Network, said in a speech at the ACAMs AML and Financial Crimes Conference.”

“If you saw a fancy Manhattan condo tower with most windows dark at night, you might think either that the occupants were very ‘green’ or that a bunch of units hadn’t been sold yet. Given her professional experience, it’s fair to say that Shasky Calvery wouldn’t necessarily take such a benign view. The FinCEN director formerly prosecuted organized crime cases, especially Russian mob matters. Money laundering investigations were part of this, and often authorities suspected that properties were purchased with the proceeds of crime.”

“The exception at this time is in two jurisdictions identified in special Geographical Targeting Orders issued by FinCEN in January 2016, effective March 1. Shasky Calvery said reports concerning covered transactions in the Miami-Dade Counties and Manhattan County have just begun to come in. ‘We welcome this interest from real estate professionals and journalists,’ she said. ‘But do I worry about the culture in certain segments of the real estate industry? Yes, I do. It was troubling to read that some legal and real estate experts mobilized immediately after the GTOs were announced to provide suggestions about ways to evade the reporting requirements. We all know that criminals seek the path of least resistance.’”

The Real Deal on New York. “Dolly Lenz appeared on CNBC’s ‘Squawk Box’ to give her take on Manhattan’s softening high-end residential market. And while far from bearish on Manhattan’s prospects at large, her insights don’t bode well for the barons of Billionaires’ Row. ‘If we’re looking at Billionaires’ Row, it’s in trouble – too much product,’ Lenz said of 57th Street in Midtown.”

“Lenz added that when it comes to the Manhattan residential market, ‘Confidence is key, and I’m seeing confidence start to wane.’ She noted factors ranging from ‘Prices [that] are too high’ to lingering concerns over the state of the economy. What does that mean for the market, and property values, moving forward? ‘Flat in normal areas where there’s some demand, [and] down where they’re overbuilt,’ she said.”

The Sun Sentinel in Florida. “After two years, construction is complete at 1200 The Ocean, and now the developer is offering discounts of up to $100,000 to sell the final 11 residences in the 18-unit luxury condominium in Hillsboro Beach. Peter Zalewski, principal of the CondoVultures.com consulting firm, said buyer incentives are more common at condos in Miami-Dade County, where there’s an oversupply of units. ‘Incentives in the six-figure range suggest the developer is trying to juice the pot to get units to [sell],’ Zalewski said.”

“Condo sales have slowed recently across South Florida, and some market followers say the luxury segment especially could struggle in the months ahead. ‘We’ve built so many, and it’s going to slow down,’ said Howard Elfman, president of the Greater Fort Lauderdale Realtors.”

The Houston Chronicle in Texas. “A development firm that had plans to build a gleaming office tower on a prime site in Midtown has shifted gears. It’s now considering other options, like leasing the property to a restaurateur or retailer, or perhaps developing condos there. Senterra Real Estate Group was unable to prelease a good portion of the proposed building, a requirement it had before moving forward with construction, said Neil Tofsky, chairman and CEO.”

“With oil below $40 a barrel, Houston’s office market is struggling. ‘People are projecting we’re going to have 10 million square feet later this year of sublease space. I think the 15-year average is probably around 4 million square feet,’ Tofsky said.”

From Chicago Business in Illinois. “Single-family home values in a vast majority of the Chicago area were lower in December than they were a full decade earlier, another sign that the region’s housing market is sleepwalking more than waking up, according to CoreLogic. Though home values have been rising for several years, they ended 2015 down from December 2005 levels in 195 of 219 Chicago-area ZIP codes. ‘Until a year and a half ago, Chicago’s rates of home price appreciation were comparable with the rest of the US,’ said David Stiff, principal economist at CoreLogic. But since early 2015, ‘Chicago has slowed down significantly,’ he said, suggesting that the area’s slow job growth has been a drag on the housing market’s recovery.”

“At the end of the list are 25 ZIP codes where values closed out 2015 at least 25 percent below where they had been 10 years earlier. They include ZIP code 60804 in Cicero, which was down almost 40 percent, and ZIPs 60406 in Blue Island and 60629 in the city’s Marquette Park and Chicago Lawn neighborhoods, down more than 37 percent. In ZIP 60085 in Waukegan, prices are off more than 35 percent. Last week, a two-bedroom bungalow on Elmwood Avenue in 60085 sold for $75,000, or 45 percent less than the $137,000 it sold for in April 2005.”

“Mike Culat, the Re/Max Advantage agent who sold the house, attributed the deep discount to ‘the economics of Waukegan. The problem it’s been facing is jobs. That’s had a huge impact.’”

The New Jersey Advance. “Geraldo Rivera, whose waterfront Edgewater compound has been on the market for nearly a year, chopped the price a second time Tuesday. It’s now listed at $2.88 million, down nearly $1 million from his original asking price. Rivera bought a Manhattan condo last year for $5.6 million before putting the Edgewater compound on the market in May for $3.75 million. In July, he dropped the price to $2.95 million. It’s still the second priciest listing in Edgewater, right after a $3.475 million home a couple of houses away from Rivera.”