June 1, 2016

Building For Everyone But Ourselves

A report from CCTV News. “Chinese investors have overtaken Canadians to become the biggest foreign buyers of U.S. property. According to a study from the Asia Society, a surge in Chinese buying in both U.S. residential and commercial real estate took their 5-year investment total to over $110 billion last year. The National Association of Realtors says in the year ending March 2015, buyers from China snapped up $28.6 billion worth of properties in the U.S. Canadians spent $11.2 billion, And Indians spent $7.9 billion.

“‘Right now in China, the real estate market in China is bombed. Very bad. A lot of people are selling in China and buying in Manhattan or Long Island,’ Lin Pan, partner of Lin Pan International Realty, said. The average Chinese buyer is spending almost double the average of all foreign buyers and more than triple the amount spent by Americans. ‘For whole United States home buyer the average price is $255,000. The average price foreign buyers is $499,000. But for Chinese buyers, their number goes to $830,000-the average,’ Lin said.”

The Journal News in Ohio. “Construction of new homes and sales of existing homes both saw sizeable increases for the first quarter of the year in both Butler County and the region. It’s easier now for both builders and home buyers to get financing, said Dan Dressman, executive director of the Home Builders Association of Greater Cincinnati.”

“‘Inventory is very low right now,’ said Patti Stehlin, president of the Cincinnati Area Board of Realtors. ‘If you’re looking (for a home) in the price range of $150,000 to $250,000, because inventory is low, homes that are listed in that price range are flying off the market. If they’re listed properly and they’re in good condition, they’re selling the same day, sometimes within hours, sometimes before they’ve hit the MLS system,’ Stehlin said.”

From National Real Estate Investor. “Crowdfunding websites are becoming an important piece of the real estate financing puzzle, especially for apartment developers who need a little extra debt or equity to complete their plans. A growing number of developers are using crowdfunding to help build or renovate apartment properties. That’s partly because traditional banks are less eager to lend as financial reform regulations finally come into action. ‘It is working now and it’s just going to get bigger and bigger and bigger,’ says Markley Roderick, a partner with the law firm of Flaster/Greenberg.”

“Even though developers are opening hundreds of thousands of new apartments, strong demand seems likely to fill the new units in most markets. Most crowdfunding websites still provide loans for new apartment projects. The products range from permanent loans to smaller, mezzanine loans, or preferred equity. ‘Debt is much more popular,’ says Roderick. ‘It feels safer… In an equity investment, there is no liquidity. An investor might have to hold this thing forever.’”

The Real Deal on New York. “Luxury pads in Manhattan experienced a wave of price chopping in May, with the average contract seeing a 7 percent reduction, according to Olshan Realty. The brokerage, which tracks contracts on pads $4 million and up, said the average discount was just 4 percent in May 2015. Last week, there were 33 contracts signed – a 2016 record – but the average price drop was 11 percent, even as properties spent an average of 366 days on the market.”

“Last week’s No. 1 contract was a 2,846-square-foot condo at 15 Central Park West, asking $29.95 million – a discount from the $36.5 million asking price in August 2015. The apartment previously traded for $27 million in 2008.”

From Honolulu Magazine in Hawaii. “We’ve gotten so used to the cranes doing their dip-and-peck dance in Kaka‘ako, dominating our skyline and the conversation, that it comes as a bit of a shock now that the dust is settling. After all the fuss, the new towers have barely made a dent in Honolulu’s acute housing shortage. Surely, after so many units built (3,971, including those under construction), we should be seeing some relief by now. But no. Instead, rents are up and housing prices are setting records every month. What happened?”

“It may be hard on real estate developers when it pops, but the end of a bubble is usually a good thing for renters or buyers. But the moment we are in today seems different from, say, the 1980s or 2009. Future historians may note Jan. 16, 2016, as the day illusions of solving O‘ahu’s housing crisis anytime soon were laid to rest. Eight months before, in May, developers started taking deposits on a luxury high-rise called Vida at 888 Ala Moana, with units priced from $1.8 to $3.3 million and amenities.”

“When buyers rushed in to grab 40 percent of its units in the month of May, the local condo market seemed certified golden for the next decade, with plans for up to 20 new high-rise towers on the books of major players. Then came Jan. 16, 2016, and the Vida announcement that it was returning deposits and would never be built. That there hadn’t been a single sale since May warranted a gulp and a fresh look at reports of stalled luxury condo sales and frozen condo resales.”

“Locations executive vice president Scott Higashi had signaled concern nearly three months earlier: ‘Certainly at the high price points, from $1.7 million and up, the market is tight. I don’t think there are enough buyers in that marketplace to support the inventory, and it has slowed.’ By January, Higashi had scaled back that $1.7 million to $1 million and up.”

“The boom was over. A tale of two markets, it seems. And, possibly, a core problem: We’ve been building for everyone but ourselves. And, while we love our ‘ohana, too much togetherness is beginning to wear on us. We’re being squeezed financially to pay the rent or the mortgage, or being squeezed into too little space with too many other people. ‘I’ve seen a 30-percent appreciation in the better neighborhoods three years in a row,’ says appraiser and real estate expert Stephany Sofos. ‘Everybody says we’re not in a bubble. We’re in a bubble.’”