The Housing Bubble

The Mercury News reports from California. “More than one-third of Bay Area residents say they are ready to leave in the next few years, citing high housing costs and traffic as the region’s biggest problems, according to a poll. Of the 1,000 people polled by the Bay Area Council, 34 percent said they are considering leaving. ‘We can whine about this, or we can win by solving our traffic and housing problems,’ said Carl Guardino, president of the Silicon Valley Leadership Group. ‘The last time the Bay Area had seemingly solved its traffic problems was the worldwide recession of 2008. A recession is not how we want to solve our traffic and housing problems.’”

From CNBC. “The luxury home market may be losing some of its luster. Average sales prices for homes listed at $1 million or more fell 1.1 percent in the first quarter compared with a year earlier, marking the biggest decline in more than two years, according to Redfin. Nela Richardson, chief economist at Redfin said that after 2009, the asset-rich benefited from rising values. ‘There was so much stability in asset growth that the wealthy felt comfortable making a large purchase,’ she said. ‘That stability is over.’”

“The supply of homes priced at $5 million or more jumped 13 percent — the biggest inventory rise in more than three years. ‘There is oversupply at the high end, especially in certain pockets and cities,’ Richardson said. It’s not just megamansions in Houston or penthouse condos in Miami Beach or Manhattan’s ‘Billionaire’s Row’ that are sitting unsold. Richardson said affluent communities like Montgomery, Maryland, have rising numbers of $1 million or $1.5 million homes on the market with no buyers. ‘They should be flying of the shelves,’ she said. ‘But these homes are just sitting there.’”

The Naples Daily News in Florida. “According to the Bonita Springs — Estero Association of Realtors (BEAR) Media Committee, activity in the Bonita Springs and Estero housing market saw a downshift in sales for March and overall for quarter one 2016. However, more inventory continues to come into the market. Regarding a five-month downshift in the market, buyers are still looking, but the rush to buy was not present in early 2016 as in past years.”

“What was also evident in quarter one was that traditional resales are in competition with new construction. ‘Sellers have been frustrated by the longer sales cycle,’ stated D. Michael Burke, 2016 BEAR President. ‘In regards to new construction competition, sellers need to be mindful and realistic about their listing prices and the condition of the property.’”

The Houston Chronicle in Texas. “This week marks two years since a judge ruled the proposed Ashby tower could go forward after a month long trial and jury verdict that agreed with residents that the 21-story tower would be a nuisance to surrounding property owners. The judge agreed to some of the roughly $1 million in damages jurors assessed against Houston-based Buckhead Investment Partners but denied residents the permanent injunction they were seeking to halt the project. Yet the 1.6-acre lot sits empty as both sides await a decision on their appeals. ‘It feels like we’re in limbo,’ said Penelope Loughhead. ‘We’re in the dark. We know they are allowed to build, but no ground has been broken.’”

“The developers declined to comment. Development, particularly of multifamily family buildings inside the 610 Loop, boomed in the wake of the Ashby ruling, but depressed oil prices have now led to tightened financing for such projects. Real estate experts say that the market is overbuilt for high-end apartment projects in Houston. ‘The delay from litigation may actually have benefited the developers by avoiding an adverse market,’ said John Mixon, a retired University of Houston law professor who specializes in property rights. ‘I doubt that the developers would have chosen this outcome, though.’”

The Associated Press. “Jami Patel spends long hours behind the front desk of a nearly empty motel, desperate for someone, anyone, to check in. Hardly anyone ever does, not since the once-booming natural gas industry pulled up stakes amid a prolonged, severe slump in energy prices. ‘I don’t know how much longer I can hold on,’ lamented Patel, 43. ‘If it continues like this, the business is going to be dead.’”

“That’s the last outcome Patel would have envisioned after she and her husband spent more than $1 million on renovations a few years back. Times were good then; the 50-room Rodeway Inn was routinely filled with some of the legions of gas workers who helped turn Pennsylvania from a bit energy player into the nation’s No. 2 natural gas-producing state, after Texas. When they were here, the drillers made a lot of people feel flush. Landowners with mineral rights commanded signing bonuses of thousands of dollars per acre. Landlords hiked rents.”

“Towanda’s story is playing out everywhere the drillers are leaving or have left, places like Gillette, Wyoming, and Oklahoma City, where there have been massive job layoffs at energy company headquarters and the downturn has blown a billion-dollar hole in the state budget. The fallout is readily apparent in Towanda. For-rent and for-sale signs are plentiful along Main Street. ‘I don’t think anybody saw it coming, to this deep of a decline that quickly,’ said David Spigelmyer, president of the Marcellus Shale Coalition, a trade group.”

The Grand Forks Herald in North Dakota. “As drilling rigs went from more than 200 during the boom to below 30, development has dried up. A Home Depot store that opened just three years ago will close next week. Shane Roers came from the family business in Fargo to Dickinson, where Roers West has made a mark developing new projects for businesses, apartments and homes. Now, they’re trying to weather the slowdown.”

“In Williston, hotels have the biggest challenges. Twenty-two were built during the boom, and even that wasn’t enough back then. Now they have 1,800 open rooms and are running at just 20 to 25 percent capacity, said Tom Rolfstad, Williston’s former economic development director. With about 3,200 vacant apartments in Williston, Rolfstad figures about 6,400 bedrooms are vacant. And rents are down by ‘half at least,’ he said.”

“At the height of the boom, tenants were paying $2,500 a month. Now, occupancy is so low property managers are offering deals and incentives to renters who often are paying something close to $750 a month.”