The Housing Bubble

Lex 18 reports from Kentucky. “Experts said the market in the Bluegrass is hot. It’s the best that realtors have seen in years, especially in Lexington. Lucy Clark has been on the hunt for a new home for about a month. However, she said houses are flying off the market. ‘It definitely seems crazier than it was when I bought a home three years ago,’ said Clark. ‘It’s kind of crazy right now to be honest with you,’ said Ty Brown, President Elect of the Lexington-Bluegrass Association Of Realtors. It’s also a first for many sellers, such as Mitzi Riva. She just put her mother’s house on sale.”

“‘Absolutely crazy,’ said Riva. ‘There has been probably five realtors here in the last hour.’ Realtors said the only comparisons are 2005 and 2006, however this time there’s no bubble, the market is healthy.”

The Dallas Morning News in Texas. “Median new home prices in the Dallas-Fort Worth area now top $300,000 – almost 50 percent more than what you’d pay for a mid-priced preowned home in the area. Median new home prices have increased by almost 60 percent in North Texas in the last decade, Metrostudy figures show. In the first quarter, starts of houses that will sell for $500,000 to $749,000 rose more than 50 percent, the research firm found. And starts of homes priced at $750,000 and more were up by more than 30 percent. Total home starts rose 22 percent in the first quarter from 2015 levels, Metrostudy reports.”

“‘Due to rapidly rising land and development costs, developers argue there is little hope for the revival of the sub-$200,000 new home market,’ said Paige Shipp, regional director for housing analyst Metrostudy. ‘An entry level home on a typical 50-foot-by-110-foot lot is no longer feasible.’”

The Tampa Bay Times in Florida. “It may be a seller’s market but try telling that to a lot of overly optimistic ones. Despite a shortage of available properties in the Tampa Bay area, sellers are reducing prices on hundreds of homes even before the first offer comes in and the true haggling begins. In the past seven days alone, there have been price reductions on nearly 1,000 single-family bay area homes, according to the Multiple Listing Service. Many of those already had price drops and some are in especially hot markets.”

“Last year, Ann Rogers, an agent with Northstar Realty in St. Petersburg began noticing a significant number of price reductions as she searched on MLS for homes that were south of Pinellas County’s Ulmerton Road and that were on the market for at least $500,000. That perplexed her. At a time when the supply of homes was so tight, shouldn’t demand have been keeping prices up? ‘All of sudden in November the price decreases started outweighing the new listings,’ she said. ‘So I thought, what’s going on here, and it must be that real estate agents in pricing property must have overshot the market and the market isn’t going up as fast as we anticipated and now we’re getting a course correction.’”

“In just the past seven days, prices have been cut on 371 single-family homes in Hillsborough, 325 in Pinellas, 195 in Pasco and 31 in Hernando. For Hillsborough, that’s 9.2 percent of all active listings. For Pinellas, it’s 11 percent. And some of those houses that didn’t have price decreases in the past week might have dropped in price earlier. ‘There’s been a ton’ of reductions, says Vince Pennino, a veteran Coldwell Banker agent. ‘The buyer will pay what the house is worth but they are not paying any more than the house is worth. That sounds simple and crazy but there was a time when they would.’”

Biznow in Georgia. “The apartment arm of one of the nation’s biggest homebuilders is taking a crack at the hot Midtown multifamily market. Lennar Multifamily is aiming to develop 195 Thirteenth St, a 27-story, 307-unit apartment project. But it’s coming at a time that many consider the later stages of a multifamily boom that has literally transformed the skyline in the city. We recently reported how multifamily listing website Adobo is seeing asking rents begin to decline in Atlanta. And a number of finance execs told our audience during a recent capital markets event that lending for new multifamily projects is getting tighter as concerns grow about the number of units still to come to the market—and the depth of the demand for them.”

“In a recent survey of apartment developers, Haddow & Co found that Buckhead may be in trouble, with 62% of the 71 respondents believing the Buckhead/Brookhaven submarket is at the greatest risk of overbuilding. In that same survey, 80% feel that debt financing is pulling back. But despite that, nearly two-thirds are still pursuing new apartment sites. Ladson Haddow says performance may be peaking with a flurry of units in lease-up or underway. ‘We don’t believe that there’s a lot of growth left at the high end of the market,’ Ladson says. He notes that while asking rents are at all-time highs, concessions have begun to creep back into the market.”

“He notes that 11 apartment towers in Midtown delivering in the next 18 months will likely need to achieve $2.50/SF rents to justify development costs. ‘The reality is nobody knows how the market’s going to react to that much luxury supply. I think we’ll all find out how deep the demand is for luxury product in Midtown soon enough.’”

The Real Deal on New York. “Real estate investment trust UDR is starting to feel the supply squeeze in the Manhattan residential market. On a first-quarter earnings call Tuesday, COO Jerry Davis noted that an expected influx of new apartments through 2017 forced the company to revise revenue growth projections. Davis said the Denver-based residential REIT is ‘beginning to feel the impact from the new supply in the Manhattan market.’”

“That new supply consists of 25,000 new apartments slated for delivery through the end of this year and ‘even higher’ deliveries of 30,000 new units in 2017, Davis said. The REIT also said it is projecting its 2017 revenue growth figures for New York to be ‘moderately lower than in 2016,’ also attributing that to the ‘continuing pressures of new supply.’”

“Davis cited third-party data indicating that nationwide apartment operator could expect unit supply to ‘peak this year’ in every one of its markets ‘with the exception being New York City.’ New York is also the only market UDR operates in ‘that will experience a higher number of deliveries in 2017 than in 2016,’ the REIT said.”

SF Curbed in California. “If you’re smarting over your mortgage, you can always console yourself that at least you have it better than everyone who‘s still renting — unless you bought in Cupertino, Los Altos, or Woodside, in which case we’re afraid your tenants are getting the last laugh. That’s what Trulia’s bi-annual, 100 metro area Rent vs. Buy report says, which singles out the nine exclusive Bay Area communities where the number crunching shows that renting is a better deal than buying.”

“Anyone with a lease within nine select metro areas can pat themselves on the back for beating the housing crisis, at least for now. The town of Los Altos Hills (not to be confused with the actual city of Los Altos, right next door) gives the best value: The median rent is over $10,000, but since the median home value is over $4 million. Technically speaking, that’s a bargain by a margin of 16.2 percent.”

“Saratoga comes in second with $6,100 rents over $2.3 million home values, a savings of 12.1 percent. Third is Monte Sereno (population 3,300), where you get a savings of 11.9 percent by renting for $7,000 a month rather than buying a home for $2.7 million.”