The Housing Bubble

It’s Friday desk clearing time for this blogger. “A new wind is blowing in the nation’s housing market. And if one of the industry’s top economists is prescient, it’s a wind that could begin to cool the red-hot real estate market in high-growth cities around the country. Declines in home buyer traffic and changes in consumer attitudes about housing purchases are showing up after several years of positive growth, says Lawrence Yun, chief economist for the National Association of Realtors. ‘One thing that is clear is there is much weaker momentum now compared to six months ago, one year ago or even 18 months ago,’ Yun told thousands of real estate agents meeting earlier this month in Florida.”

“Yun said lender surveys show that fewer people are applying for loans to buy homes, even though interest rates have remained relatively low. ‘It had been consistently positive up to the summer,” he said. ‘Ever since the summer, it’s beginning to trend down from one year ago.’”

“Manhattan landlords are giving renters more financial incentives than ever in a bid to keep apartments from going empty while the market gets flooded with new supply. At the end of last month, there were 7,132 apartments available for rent in Manhattan, a 23 percent jump from October 2015, according to the report. The annual growth in listings has topped 20 percent every month this year since March.”

“‘There must be great concern because of how much competition has been added to the market over the last couple of years,’ said Jonathan Miller, president of Miller Samuel. ‘This is probably not a temporary blip.’”

“With more than 28,000 apartments set to open in North Texas next year, will there be enough renters to fill them all? More than 50,000 apartments are under construction in North Texas — more than any other metro area in the country. Developers say the spike in apartment costs has put a strain on renters. ‘It’s an affordability issue,” said Doug Chesnut, one of the founders of StreetLIghts Residential, one of Uptown’s busiest apartment developers. ‘People just can’t afford the cost. We can build it, but if they can’t afford it, it will sit there vacant.’”

“Really, really bad. That’s the current outlook for luxury housing in the United States. Right now, the supply of high-end homes is rising, demand is falling, and prices are being cut. Making matters worse, an ongoing Federal criminal investigation into wealthy home buyers across the country is scaring away skittish foreigners. Greenwich, Connecticut, home to some of the richest people and most expensive homes in the world, is in deep trouble. As you can see in the numbers below, there’s a staggering amount of houses sitting on the market.”

“$3 million to $4 million: 17 months of supply which has risen 38% over the past year. $4 million to $5 million: 22 months of supply, +35% over the past year. $5 million to $10 million: 48 months of supply, +108% over the past year. Greater than $10 million: 128 months of supply, +63% over the past year. To put that last bullet into perspective, at 128 months, that’s almost 13 years of supply.”

“Just this week I was speaking with a new client who lives in Corinth Hills. We were discussing the market when he made the comment that he and his wife had noticed the market has shifted. I asked him why he would say that, and he said they had noticed homes that were once selling in a day — or not even hitting the market — were now taking much longer to sell.”

“Several weeks ago I wrote about market downturn indicators and how the Shawnee Mission area was already seeing 3 of the 5 indicators. Well, as of this week, we are now at 5 out of 5. In the last two weeks, we have been hired by two Prairie Village families who have been on the market for at least 60 days and have not successfully sold yet. This is the first time that I have listed a previously listed home, let alone two, in a couple of years. In both cases, it seemed that the prior strategy was to let the seller’s market do the heavy lifting. Well, unfortunately, since July, those days are gone.”

“I have learned through the years that shifts in real estate happen gradually and then suddenly. The suddenly is the drop in sales, and it has taken many a Realtor’s breath away. If you look at the comparison of last October to this October, you will see that the months of supply is up 49.9 percent comparatively. Now let’s notice what has been happening since April 2016. The supply has been slowing going up. Not dramatically, but rather gradually. That is until October when, BAM, the inventory doubled!”

“Six months after a red hot real estate market on the North Shore peaked at scorching highs, a dramatic cooling has sent sales into the deep freeze and prices are falling. ‘We have a completely collapsed activity level,’ said Realtor Brent Eilers of Remax Masters Realty in West Vancouver. ‘What the market’s done since Aug. 1 is dramatic.’”

“Prices are beginning to fall, said Eilers, who added those who want to sell their house now will likely get between 10 and 20 per cent less than they might have got at the earlier peak of the market. Many of the homes selling have ‘greatly reduced their price to get the home sold.’ ‘That’s a big shift in the mood of the market,’ he said. ‘Now the pressure’s on the seller. There are a lot of people who are overexposed financially.’”

“The number of unsold central-London homes under construction will reach a record high this year, increasing the risk that developers’ bets on rising demand for luxury properties will go sour. Luxury home prices have been dropping across the market. Values in Chelsea and Knightsbridge fell 9.9 percent and 5.6 percent respectively in the year through October, according to broker Knight Frank LLP. To the north of Hyde Park they were 8.2 percent lower.”

“‘A glut of inappropriate residential stock has been bubbling for some time now across prime central London,’ said Faisal Durrani, head of research at broker Cluttons LLP. ‘An unfortunate combination of domestic and global events has accelerated a market-wide slowdown that has been under way for almost 18 months now.’”

“Investors have abandoned property in the battling steel town of Whyalla with average rents tumbling 27 per cent in a year, while house prices have plunged 25 per cent as sellers face a wait of nine months to offload sharply discounted properties. ‘Investors have been non-existent for the last six months. They’ve disappeared,’ said Peter Calliss, a real estate veteran. ‘The banks have tightened up. It’s just been a flow-on effect.’”

“The recently implemented housing sales restrictions are alarming real estate agencies and property developers. This real estate agency in Shanghai’s downtown Jingan used to be one of the company’s best-performing branches in term of sales volume. But since Shanghai launched a new series of housing policies last month, almost none of the staff bothers to come to the office.”

“‘Some 50 to 70 percent fewer clients are coming to see apartments. There are fewer apartments on the market and recent policies have made it harder for some would-be buyers. So people are not coming,’ said Yu Jiajun, Deputy Branch Manager of Centaline Property.”

“In the hours after Donald Trump was elected US president, the Canadian immigration website crashed and google searches on moving to New Zealand rocketed. But it’s not a case of just packing a bag, because for one thing, New Zealand has a housing crisis that won’t accommodate Trumpfugees. New York Times columnist Gail Collins jested about the potential flood of Americans to other shores: ‘Forget about moving abroad. Of course it sounds tempting, but you’d be surprised how many countries are unenthusiastic about acquiring new former-American citizens. Plus there’s that terrible housing bubble in New Zealand.’”