September 18, 2016

Mired In A Recession That Never Ended

The Tech Times reports on Florida. “While luxury condos may not be a novelty, a Miami-based developer is poised to take things up a few notches — by offering a luxury condominium that is only meant for cars. Even though the luxury building in question in downtown Miami will have a social club exclusive to members, a concierge service, 24/7 security and climate-controlled units, it will not have residential accommodation. AutoHouse is a luxury condo that will only be a housing space for cars. AutoHouse, the brainchild of developers Louis Birdman and Jay Massirman, is basically a seven-story car storage that has 45 units. It also has a Collectors Club and the project is based in Miami’s Overtown neighborhood.”

“Each unit is climate-controlled and the space you get for $350,000 is sufficient for accommodating two cars, whereas the biggest unit is 2,200 square feet and sells for $1.5 million. The project may sound quite ambitious and even though the sales kicked off in August, so far no contracts have been signed. However, Birdman disclosed that several interested buyers have already reserved units and put down money for the same. AutoHouse will also cash in on the snob value surrounding luxury vehicles as collectors will have a designated place where they can show off their cars.”

Mortgage Professional America. “Michael Phelps has sold his Baltimore townhouse for $960,000. The Olympic gold medal-winner is not used to losing but on this occasion he fell short of the $1.03 million he paid for the home in 2012.”

The Washington Post. “For five summers, a tarp has covered the swimming pool at Grand Bel II, a condominium community in Silver Spring that has no money for lifeguards, chemicals or insurance. The Vistas at Washingtonian Woods in Gaithersburg faces $600,000 in repairs but has just $400,000 in cash reserves. At Saxony Square in Alexandria, an unemployed man nine months behind on his mortgage negotiates with lenders to keep his two-bedroom condo. His neighbors struggle to pay their monthly fees; since 2010, Saxony’s board of directors has filed more than 80 court actions to try to collect such assessments.”

“Even as posh condos rise in trendy neighborhoods around the nation’s capital, many older complexes are mired in a recession that never ended. Grand Bel II, a 1960s-era complex, ‘is not the Ritz,’ as former property manager Eric Cooper put it. But it has been a sturdy launchpad for immigrants and young families. Bulgarian-born Aneta Lefterov purchased her two-bedroom in 2010 for $106,000, a bargain price, flattened by the housing bust. She took advantage of a Federal Housing Administration-insured loan, allowing her to make a low down payment, and was able to stretch her salary as a workforce consultant for the state of Maryland to cover her mortgage payment and the $490 monthly fee.”

“The problem is the condo economic model, in which your neighbors are also your business partners, obligated to pay their share of common expenses. Even before Lefterov moved in, there were signs of distress. As the economy deteriorated, more Grand Bel II owners had trouble paying their bills. To forestall mortgage default, many opted to stop paying monthly assessments. The board took out a $1 million bank loan to address a serious drainage problem, which depleted cash reserves. Monthly fees ticked upward: $550, then $592, then $655. The board levied a special one-time assessment of between $800 and $1,200 for each unit.”

“‘We’re going to get to the point where we won’t be able to pay,’ Lefterov said.”

“Housing advocates and condo board members say lenders also hurt condo complexes by failing to quickly process foreclosures and offer units for resale. Such ‘zombie foreclosures’ are especially prevalent in cases where the value of the property is less than the balance on the loan, critics say. ‘Some of these units have dropped more than 50 percent in value, so [banks] sit on them and hope that the markets come back,’ said Jackie Simon, a Montgomery County real estate agent and housing activist.”

The Press of Atlantic City in New Jersey. “A new national survey says affordability is a growing concern across the country for people considering buying homes, but that’s not such a major problem these days in Rose Kelly’s corner of the market. In a recent ad, the highest price for a home in her ad was $110,000 for a ‘lakefront townhouse’ in Galloway. The lowest price was $54,000 for a one-bedroom place in Egg Harbor Township ‘in need of rehab.’ ‘There are so many homes in South Jersey at an affordable price, but they need updating or they’re sold as-is,’ said Kelly, whose territory runs from Egg Harbor City and Mays Landing into Atlantic City. ‘You can get a lot of house for the money.’”

“Buyers and sellers around much of South Jersey know very well that there’s no shortage of options available on the local market. ‘A lot of homes are upside-down right now,’ Kelly said, meaning the owners owe more on them than the houses are worth. ‘A lot of people haven’t been able to pay their mortgages because of casinos closing. The availability is definitely here. It is a buyer’s market.’”

“In Atlantic County, the number of single-family home sales climbed almost 23 percent from January through July over those same months in 2015, but the median price dropped more than 13 percent. Kelly said agents have a lot of tools they can use to help people buy their first homes, starting with simple math. ‘You can actually own a home for less than you pay in rent,’ she tells customers, who probably don’t know all the programs available to encourage first-time buyers. ‘A young couple just starting out, they can’t afford a $200,000 house, but they can come to the (settlement) table with no money down and no closing costs, which is very appealing to people,’ Kelly said.”

Declining Prices Are Difficult For Some To Accept

A report from CTV News Vancouver in Canada. “Dozens of Metro Vancouverites gathered downtown Saturday to demand government action on the region’s housing affordability crisis, calling for a crackdown on money laundering. Speaking at the rally was Christine Duhaime, a lawyer who specializes in money laundering. She estimates more than $150 billion is filtered into Canada from China each year. ‘It’s in all sectors, but especially in real estate because it’s easier to hide it here,’ she said.”

“Duhaime is calling on the federal government to investigate money that could be entering the housing market illegally. ‘Large proceeds of crime leaves China in large volumes,’ she said. ‘Vancouver’s a key destination for some of that. We know China’s coming after it, and Canada isn’t doing much to assist China.’”

“‘A generation ago a million dollars would have bought you two entire homes and now it barely buys you two bedrooms,’ added Paul Kershaw, a UBC Professor who has started a movement called Generation Squeeze. ‘We’ve come together to say this is madness, we’ve got to stop this problem – the cost of housing has reached code red crisis proportions.’”

The St. Albert Gazette. “As the region experiences a slowdown in its condominium market, St. Albert continues to buck the trend with increasing sales. While August real estate numbers show that Edmonton region condo sales were down six per cent from the previous year, St. Albert saw an increase of 18.2 per cent, from 22 units to 26, in August 2016. Condo prices, however, were more in line with the rest of the region. In July, a condo in St. Albert sold for an average of $291,000. Last month that price dropped 11.6 per cent to $257,207.”

“The average condo price for the Edmonton region was down two per cent month-over-month to $251,526 and one per cent year-over-year. ‘While unit sales for condos have been impacted the most, prices remain stable,’ said Steve Sedgwick, chair of the Realtors Association of Edmonton. ‘This is thanks in part to the continuing trend of unit sales of over $750,000 that are keeping average sales price of condos elevated by almost three per cent.’”

“But in St. Albert, where the median sale price was $235,750 this month, compared to $290,000 in July the same does not hold true. Average single family home prices dipped 5.7 per cent from $508,053 to $479,279 over last year. This represents a bigger decrease than the Edmonton region as a whole, where year-over-year prices have remained stable decreasing by less than one per cent. According to Canadian Mortgage and Housing Corporation’s latest numbers, the Edmonton region has hit the lowest level of housing starts since 2012. ‘Slower economic conditions have tempered demand,’ said Christina Butchart, CMHC’s principal market analyst for Edmonton.”

The White Court Star. “Whitecourt’s real-estate market is on large downward trend as it feels the sting of Alberta’s struggling oil-based economy. Housing sales for both Whitecourt Re/Max Advantage and Exit Realty have dropped significantly from previous years. Sales for this year from January to August for both companies declined over 40 per cent from the same time frame in 2015, and over 50 per cent from 2014.”

“Brian Ames, Whitecourt Re/Max Advantage owner and broker said in his 32-years in real estate, the market has never looked this slow. ‘This is probably the slowest I’ve seen it,’ Ames said, adding that local people not being able to afford homes is beyond their control. ‘What bothers me is – it’s not that people are running their business or personal finances incorrectly, they have nothing to do with it. It’s simply the price of oil and their companies not being able to afford them.’”

“The average housing price has also dipped for both agencies, by approximately 10 per cent from 2014. Ames said people are not able nor willing to sell their homes below a certain price point based on how much they spent on their mortgages. He added that declining housing prices is difficult for some to accept. ‘It’s less to do with our house than it is to do with the buying ability, the confidence in the market,’ Ames said.”

“However, Exit Realty Whitecourt owner and broker Paul Chauvet said without Whitecourt’s forestry sector and other industries faring better than the oil industry, things would have been much worse. ‘If we didn’t have those, there would definitely be blood in the streets. There would be a lot more drops in prices,’ Chauvet said.”

“He later added that people were being unrealistic if they expected housing prices to drop much further beyond this point, based on sales figures. ‘We’re going to see fewer sales, yes, but a 30 per cent drop next week – that’s one of the hesitancies too, ‘If I buy this house at $300,000, next week it might be $250,000.’ No, not going to happen.’”

The Business News Network. “A top-ranked real estate analyst is making the case for renting over owning a home. In his new book The Wealthy Renter, Alex Avery, who currently owns a home, argues that home ownership doesn’t necessarily provide the returns many people believe it does. ‘The perception of home ownership is a lot different than the reality,’ he told BNN in an interview. Avery said a number of contributing factors including maintenance costs, utilities, property taxes, the difficulty to quickly uproot and move, and the fact that it’s ‘quite expensive’ to purchase a home in Canada can make renting more financially appealing.”

“This is especially true, he said, for millennials and first-time buyers who may be feeling pressure from their parents, friends, lenders, and even the government to purchase a home. ‘I think there’s a lot of promotion of homeownership,’ Avery said, calling it a cult. ‘It is a pretty universally-promoted decision – there are very few people who will promote renting,’ he said.”

“‘This idea that you’re throwing your money away on rent is a commonly-used argument not to rent, but it’s just not accurate,’ he added. ‘The yield on housing is so low today because the cost of buying is so high.’”

“Despite the fact that many think of a home is an investment, Avery argues it is a consumption item. ‘And it’s easy to fall into the trap of thinking a home is an investment, buying one, and then massively overspending on housing,’ a dynamic he calls ‘investment creep.’ Avery’s suggestion? ‘The best cure for investment creep is renting!’”