The Market Has Reached Its Apex
A report from Community Impact in Texas. “Austin Board of Realtors market data for single-family homes in Southwest Austin over the past five years indicates that inventory is increasing slightly in some areas and dramatically in others. ZIP codes where homes fall into a higher price range, such as 78735 and 78737, are seeing inventory figures almost double from December 2015 to October 2016, demonstrating that supply is driving down demand, and buyers are becoming more cautious. ‘The market is softening a bit,’ said Burt Dement, a Broker Associate for Realty Austin’s Southwest Austin office. ‘Buyers are resisting the increased prices, so homes are sitting a little bit longer and inventory is building up.’”
“As inventory increases, buyers are realizing they have more options—causing sellers to rethink their price points. ‘There have been really strong sales, but now all of the sudden you have more supply, which drives demand down a little bit,’ Dement said. ‘Now that we have the supply, buyers have a lot more options and can negotiate a little bit more.’”
The San Francisco Chronicle in California. “The penthouse in the luxury high-rise Millennium Tower has just sold for $13 million, according to the Wall Street Journal, despite the fact that the sinking luxury high-rise has a lean you can see from space. The sixtieth-floor grand penthouse may be a few inches lower than it was when it was purchased and subsequently built out by venture capitalist Tom Perkins in 2009, but that didn’t stop tech veteran Craig Ramsey from purchasing the 5,000-square-foot space.”
“In fact, Ramsey told the WSJ he felt the price was ‘very reasonable’ and ‘well below what the market was nine months ago.’ He added that after talking to engineers and attorneys he felt the risk was low enough to be worth the reward of getting the penthouse, which cost Perkins (who passed away in June) about $18 million to purchase and build out. ‘I’m willing to take whatever risk there is to benefit from a depressed environment,’ Ramsey said.”
From Florida Politics. “Senate budget chairman Jack Latvala isn’t interested in balancing state government’s books on the backs of counties hit hard by the BP oil spill. And he believes the state might have to let local property taxes increase along with home values. Those are among the pressures on the state’s finances projected during the next three years, according to Amy Baker, coordinator for state Office of Economic and Demographic Research. ‘We’re building a structural imbalance,’ Baker said.”
“The good news is that the tourism economy is doing well. And although construction is lagging, there’s a large ’shadow inventory’ of distressed homes left over from the foreclosure epidemic that followed the Great Recession. They’d likely have to be torn down and rebuilt, and that would mean jobs, according to a report Baker’s office prepared for the committee.”
From Crain’s Chicago Business in Illinois. “After rising for six straight years, spending on Chicago-area commercial and residential construction projects is expected to drop in 2017 amid a cooling apartment market. After propping up the construction market in recent years, residential development will drag down overall construction starts to $12.3 billion in 2017, a 6 percent drop from this year, according to Dodge. The main reason: Apartments, the strongest sector for developers and construction firms the past few years, will lose a lot of their oomph.”
“‘We are starting to see that multifamily market slip across the country,’ said Richard Branch, senior economist at Dodge. ‘There’s been so much high-end construction going on, especially in the major metropolitan markets, that the market has kind of reached its apex.’”
“Dodge estimates residential construction starts will drop 27 percent in 2017 from $7.5 billion this year—the biggest volume since before the last recession in 2006—with multifamily starts plunging 48 percent. The expected dip in multifamily construction comes after a wave of new downtown apartment towers in recent years that has landlords bracing for a decrease in occupancy and rents. ‘When you have projects of the magnitude of Vista Tower and One Bennett Park, even in a large metropolitan market like Chicago, the market isn’t going to support two projects of that size in back-to-back years. For those two projects, that’s almost $1.3 billion (in construction costs),’ Branch said.”