October 25, 2016

We Are Having A Major Correction

A report from the Journal News in New York. “Developers who are currently building thousands of new luxury apartments in Westchester say they remain confident that their units will be quickly leased once completed, even if the rental market to the south in New York City is showing signs of cooling down. ‘We are not concerned about overbuilding,’ said Arthur Collins, president of Collins Enterprises. His firm is currently developing its third luxury rental building, to be known as Hudson Park River Club, on Yonkers’ waterfront. ‘Basically, there’s a shortage of housing in New York City. So our theory is it will take an awful lot to actually build out (here) to meet what the market demands.’”

“More than three-dozen rental projects — totaling nearly 7,000 units — are currently being built or proposed in Westchester. Rents soared in major cities across the country in recent years, including New York City, making Westchester more attractive as a less-costly alternative. But a glut of rental buildings in New York City now appears to be causing some market slowdown there.”

WTOP in Virginia. “Monthly numbers on residential real estate sales can be volatile, and median prices based on just a few hundred sales aren’t necessarily indicative of the market, but year-over-year prices have declined for two consecutive months in Arlington County and were relatively flat earlier this summer. Arlington County remains the most expensive county for housing in Northern Virginia, but Long & Foster Real Estate Inc. says the median price of a house or condo that sold in Arlington County in September was $515,000, down 10 percent from a year ago.”

‘The median price was based on 219 sales. By that metric, the number of sales in Arlington County was also 15 percent lower than last year. The 196 sales in Alexandria City last month yielded a median price of $447,500, down 2 percent from September 2015. Sales had fallen 12 percent. ‘Conservative appraisals and buyers have kept things tempered,’ said Gary Lange, managing broker at Weichert Reality in Vienna.”

The Naples Daily News in Florida. “Single-family homes in the Naples area had the slowest price growth in the state in September, a new report on existing homes says. Bonita Springs broker real estate agent Michael Burke said Collier County buyers are often out-of-towners looking for second homes, while those buying in Lee County tend to be workers looking for something affordable and practical. ‘The ‘need to buy’ market is increasing, but the ‘want to buy’ market is slacking off,’ he said.”

“Statewide, overall inventory levels and days on the market continued to creep up, while the number of cash buyers declined, Florida Realtors said. A similar trend held true for Southwest Florida. Naples appraiser Cindy Carroll said that’s good news for buyers, who can expect more selection and less competition from investors and others. And it’s also a sign that sellers need to take a hard look at their direct competition in the market when pricing their properties. But she added: ‘We should not interpret these statistics as negative. We’re exactly where we’re supposed to be in the cycle at this time.’”

The Atlanta Journal-Constitution in Georgia. “Atlanta’s price hike beat the 5.1 percent average increase for the top 20 metropolitan areas, according to the S&P/Case-Shiller House Price Index, a calculation based on a three-month average. Of course, averages can be misleading and the gains in Atlanta have been uneven. There are neighborhoods that have barely come back from the crash that followed the burst he housing bubble and the vicious recession. Some larger areas too remain burdened, especially on the south side of metro Atlanta: About 58 percent of Clayton County’s homes are underwater, according to Zillow.”

“Experts said the market had split – with a scarcity of sale listings among modestly priced homes and a surplus of homes for sale at the top end of the market. So average prices are up solidly from a year ago, the pace of that rise was already slowing and in many parts of metro Atlanta there has been a turn south. said Nancy Keenan, a Realtor with Keller Williams who handles mostly listings on the north side of town. ‘I would say that 90 percent of the homes on the market have had some price reduction,’ she said.”

“While first-time homebuyers have worried about rising prices among starter homes, the recent change has hit harder at the high end, she said. ‘For a couple months, we have seen very few sales at the higher prices,’ Keenan said. ‘A couple months ago, there were falling sales over $800,000. Now that is happening at $600,000 and above.’”

“The shift will have a larger impact in coming month – and the impact could be disappointing to sellers, she said. The ‘comps’ that are used to appraise the next round of homes for sale will be the sales this fall of these lower-priced houses. That will make it tougher for next year’s sellers to raise prices significantly – or at all. ‘We are having a major correction and it is going to hurt people come spring,’ she said.”

From Silicon Beat in California. “The message is becoming increasingly clear: Rents indeed are falling around the Bay Area. New data from the Axiometrics research firm show rents dropping in San Jose, San Francisco and Oakland. The Oakland piece is a new twist; according to other surveys, Oakland rents have remained on the rise, though at a far slower rate than over the past year or two.”

“Here’s what Axiometrics has to say about average rents falling into ‘negative-rent-growth territory’: In September 2016, San Jose rents fell year over year by 3.4 percent from $2,814 in September 2015 to $2,718. During the same time period, San Francisco rents fell year over year by 3.3 percent from $3,336 to $3,226. And Oakland rents fell year over year by 0.6 percent from $2,392 to $2,378. The Axiometrics study follows one by Abodo, the apartment search website. It showed rents dropping 7 percent between September and October in San Jose (from $2,455 to $2,293) for a one-bedroom apartment, and falling 6 percent in San Francisco (from $3,698 to $3,483). However, it showed rents still climbing in Oakland — by 5 percent, from $2,256 to $2,358 for a one-bedroom.”

“One last thought: Even though the runaway market is finally starting to cool off, most middle class folks still struggle to afford an apartment here.”