An Investment That Isn’t Working
A report from the Dallas Morning News. “Hey, real estate is back! It’s not just San Francisco and its new homes ’starting in the $1,000,000s,’ as the now famous billboard cries out. I’m thinking about this while spending a few days in Sonoma County. California real estate is headed back to prices that can only be described as bubbly. The rising level of house prices also works to increase price levels for all houses and that, in turn, is reopening a dream for others — the home as ATM. Some recent research from Black Knight Financial Services, a mortgage data-crunching firm in Jacksonville, Fla., suggests this. The firm’s February mortgage monitor reports show strong cash-out refinancings across the country. The leader? California.”
“In the fourth quarter of 2015, the report notes, California refinancings accounted for 42 percent of the $7.6 billion of equity ‘extracted.’ The equity-mining home owners in California averaged a $98,000 cash-out. Typical cash-outs elsewhere were about $60,000.”
KOIN on Oregon. “With skyrocketing home prices, high demand and low supply, there’s no denying Portland is experiencing a housing crisis. The Montavilla bungalow Samantha Gladu was interested in sold for $224,000 a year ago. Now, it’s worth over $100,000 more. But she and her husband say it’s worth it. Unfortunately, she wasn’t the only interested buyer who loved the house. ‘We’ve had houses that we put in an offer and there are 24 other offers,’ Gladu said. ‘Things are going for about $30,000 over.’”
The New York Times. “Apartments for billionaires were all the rage in Manhattan three years ago when the developer Joseph Chetrit paid $1.1 billion for the granite-sheathed Sony Building at 550 Madison Avenue. Now, in the latest example of the slowdown at real estate’s highest end, Mr. Chetrit signed a deal this week to sell the tower for $1.4 billion to the Olayan Group, which is controlled by a Saudi family, and Chelsfield, which manages its properties. The companies said the building would become, yes, an office building.”
“Mr. Chetrit and his partner, David Bistricer, were under pressure to pay off short-term loans on the property totaling $925 million. They also had trouble obtaining a construction loan as lenders became wary of projects promising oversize prices and profits. Over the past three years, said Nancy Packes, a consultant for luxury residential projects, the market for billionaire apartment buyers has gone from ‘mush to ice.’”
The Real Deal in Florida. “As South Florida’s residential real estate market starts to downshift, a new report shows cash sales and bulk home purchases are beginning to thin out. Cash deals, in which a buyer closes without using financing, were down to 53.9 percent of all sales in the first quarter, according to RealtyTrac. Though that ratio has only fallen by about 0.9 percentage points from the end of 2015, it’s dropped 6.6 percentage points year-over-year. ‘While large institutional investors and other cash buyers continue to shrink as a share of U.S. home sales, these buyers still typically beat out traditional buyers using financing — in some cases even when they submit a lower offer for a home,’ Daren Blomquist, senior vice president at RealtyTrac, wrote in the report.”
“South Florida is also seemingly being drained of its bulk buyers, defined by RealtyTrac as investors who pick up 10 or more residential properties at a time, whether they be single-family homes or condos. Those types of buyers have never had a large market share in South Florida, even in hot years like 2015 when roughly 4 percent of the first quarter’s home sales were bulk purchases. The first quarter of 2016, however, saw only a bulk purchase market share of 2.5 percent. Market-wide, bulk purchases came with a 19 percent price discount in South Florida during the first quarter, the report showed.”
The Herald News in Massachusetts. “For the second time in a month, a Fall River City Councilor is facing foreclosure proceedings on a rental property. This time, it’s President Shawn Cadime, whose property at 983 Rodman St. was listed in a legal advertisement for foreclosure in The Herald News on April 18 and April 25. The Rodman Street property is one of three investment properties that he owns in the city, he said, and attempting to sell it or have it taken into foreclosure was a ‘business decision.’”
“Cadime said he bought the property in 2005 at the height of the housing market, and then it ‘crashed in 2008.’ There has also been a large reduction in rents that landlords charge compared to the time he purchased the properties, Cadime said, and he said the rental demand in the city is lower. ‘You’ve got to make a decision and not hold onto an investment that isn’t working,’ Cadime said.”
KARE on North Dakota. “In the last two years, Williston has gone from overcrowded boomtown back to quiet hometown. There are clear signs across the region that housing and infrastructure built during the boom is now at risk of sitting unused. ‘Everybody’s trying to figure out what’s it going to take to keep them afloat,’ said Dave Rousher, manager of ND Indoor RV Park, which was built by a Minnesotan near Watford City.”
“At its peak, ND Indoor RV Park was overflowing with a waiting list. But now, Rousher believes they are doing better than most at just 38 percent full. ‘The people who came and built things around here, they’re depressed. They have bills to pay. And a loan to pay. So they’re depressed,’ Rousher said.”
