April 15, 2016

When Investors Say Stop

It’s Friday desk clearing time for this blogger. “As they battle it for a limited number of homes and condos for sale, some buyers are not only putting in sky-high bids, they are also losing perspective and their heads, notes Sam Schneiderman, president of the Massachusetts Association of Buyer Agents. ‘The real challenge in his market is that some of these buyers are either encouraged or decide to just throw all caution to the wind and they make crazy offers,’ Schneiderman said. ‘We just can’t coach our buyers into making crazy offers with no mortgage and no inspection contingencies.’”

“Some buyers are even waiving mortgage contingencies when they don’t have nearly the cash to follow through and buy the condo or home in question if their loan falls through, notes Neda Vander Stoep of Coldwell Banker Residential Brokerage’s Back Bay office. At the very least, they are putting their purchase and sales deposit at risk. ‘Many buyers are unfortunately feeling pressed to make some very tough and risky decisions when submitting offers,’ Vander Stoep notes.”

“The Miami real estate slowdown is becoming a meltdown — with the most expensive areas getting hit hardest. The total number of sales in the area also fell during the period, dropping 21.1 percent to 810 properties. Inventory surged nearly 33 percent, and there is now a 21.5-month supply of properties. Prices for the top 10 percent of condos fell by 14.5 percent, to an average sale price of $3.13 million. Condos in the hyper-exclusive community of Bal Harbour saw the average sale price fall 38 percent over the year, to $1.02 million. The number of sales there dropped 32 percent, to 30.”

“‘The high end is softer than the broader market right now,’ said Jonathan Miller, president and CEO of Miller Samuel. ‘We are coming off this unusually strong period for the high end between 2011 and 2014 and now we’re seeing normalization of that segment.’”

“The country’s hottest housing market might finally be cooling off. Home prices in San Francisco declined last month for the first time in four years, according to real estate brokerage Redfin. Sales also took a hit, sinking 22% in March — which normally marks the start of the busy home-buying season. ‘We might be in a market that will continue to contract,’ said Nela Richardson, Redfin’s chief economist. ‘When it looks like a market is contracting and getting smaller, especially with home sales being down 22% year over year — that is big number and is worrisome.’”

“After a big dip in February, Downtown Seattle condominium prices were unchanged from the previous month, remaining $786 per square foot. Prices peaked at $853 per square foot set in January but have fallen off since. The average resale price per square foot decreased by 6 percent in March to $666 per square foot, but remains 17 percent higher compared to the same month one year ago.”

“Vermont’s governor, attorney general and state financial regulators detailed a complex investment fraud scheme they said was carried out by a pair of real estate developers, one of whom is accused of using investors’ money to pay his personal taxes and to purchase a luxury condo in New York City. ‘This is what we allege fraud looks like,’ Susan Donegan, Vermont’s top financial regulator, said, pointing to a chart resembling a bowl of spaghetti to illustrate Donegan’s accusation that the developers funneled money between various accounts. Donegan described a complex, ‘Ponzi-like’ scheme starting in 2008.”

“According to court papers, the pair took in some $350-million from foreign investors through the federal job-creation incentive program known as EB-5. It enables foreign investors to get on a path toward legal, permanent U.S. residency. Sen. Patrick Leahy, D-Vermont said in a statement, ‘I’m shocked and saddened by what state and federal investigators have found. I am also aware that hundreds of investors who believed in these projects now do not know if they will see their money or any immigration benefits. It is a terrible situation all around.’”

“The era of mercurial Maple Leafs’ player Phil Kessel is truly over in Toronto. The right winger’s luxury College Park condo has sold for $3.325 million, $565,000 below the asking price. Kessel won’t see much profit from the Toronto property he bought for $3.150 million in Oct. 2009, the year he joined the Maple Leafs. The condo was first listed last July when Kessel was traded to the Pittsburgh Penguins. Initially it was priced at $4.1 million and then relisted at a lower $3.890 million. ‘This category of real estate can take up to a year to sell,’ said listing agent Geoffrey Fulton.”

“Sydney inner-city apartment prices are starting to mirror price falls in central Melbourne, by falling as much as 19 per cent in the last three months of 2015 in some areas, a report by global real estate group JLL has shown. Suburbs up to 10 kilometres from the CBD – such as Rosebery, Potts Point – and the CBD itself reported extensive price falls between the third and fourth quarters of 2015, JLL said. Prices of new apartments and re-sold apartments in Rosebery have fallen by up to 19 per cent, 12 per cent in the CBD.”

“Price changes should not be perceived as a crash but a correction, Real Estate Institute NSW president John Cunningham said. ‘When you have a lot of new units in the market, and investors say stop, discounting will occur on these units. It’s a correction, without a doubt.’”

“Remember when the Pattaya real estate development scene was taking off like a rocket? By 2006 prices on land and condos had already doubled and it would triple and in some cases quadruple in the coming few years. Those were the days and that was what started everything that we see around us today: a huge oversupply of condo units and abandoned development sites.”

“Yes, a good number of developers just didn’t put the brakes on in time and found themselves with too many unsold units and very few buyers in sight. So while we are disposing of our available supply of condominiums, let’s take a little stroll down memory lane and look back at the Pattaya property market of a decade ago.”

“Pattaya Properties had already sold 75 Ocean One Tower units—12 percent of the 626 apartments–before they even had their first press release or had driven one piling into the ground. They sold 40 units in December of 2005 at 85,000 baht per square meter, 20 units from February to March at 90,000 baht psm, and in April they sold 15 units at 100,000 baht psm.”

“If that is not ballistic enough for you: during their recent press launch in Hong Kong, Suttie announced that Ocean One Tower units would start selling at 120,000 baht per square meter when construction started in August 2006. Now that’s an over 40 percent increase in less than eight months. That’s ballistic!”

“Unfortunately ballistic just wasn’t fast enough as Ocean One Tower never got off the ground. Looking back 10 years at the Pattaya real estate development scene just makes one realize that we have done it once again a decade later.”