January 6, 2017

The Housing Fever That Could Trigger A Snowballing Effect

It’s Friday desk clearing time for this blogger. “As the market slows, the sale-of-home contingency has escaped extinction. In the real estate environment that Nashville has experienced over the past five years, one of the major issues facing sellers was how to schedule the move when the house sold. Until now, once a house was listed, it sold and the buyers wanted to move in – NOW! Now listings are aging, and offers that are contingent on the buyers selling their current residence are floating into sellers for review. The question that sellers should consider when receiving an offer containing a sale-of-home contingency is whether the home of the buyer is more sellable than the owner’s current residence.”

“Some things to consider would be area – location, location, location – and price, as overpriced houses are resting these days. The seller may continue to market the home, and if the seller receives an acceptable offer, the buyer with the sale-of-home contingency has a certain period of time – usually 48 hours – in which to remove the sale of home contingency or risk losing the house. After the seller allows the house to go to the new buyer, that person may read later that the house sold for $15,000 less than their contract. They thought the offer had to be better than theirs in order to put them on notice. In fact, the offer merely has to be acceptable.”

“After years of going up, rents in Boston’s superheated real estate market may have finally reached a peak. Data released Thursday show that apartment rental prices fell slightly at the end of 2016 — the first drop since 2010 — amid a surge of new buildings that have opened in Boston and neighboring cities such as Cambridge, Chelsea, and Somerville. It was the latest and clearest sign that the flood of construction in Boston is putting a lid on prices, at least at the upper end of the market.”

“‘When you put that much supply on the market, you’re going to disrupt the equilibrium,’ said Sue Hawkes, chief executive of Collaborative Cos. a real estate marketing firm in Boston. ‘That’s what’s happening.’”

“The controversial Yard apartment complex on Portland’s northeast waterfront is again making headlines. Renter advocacy groups are crying foul amid news the developer is renting out an entire floor of the building to a vacation rental company. When asked if removing available units from the supply chain was preventing the landlord from lowering rent, Vacasa’s Chief Development Officer Cliff Johnson said he didn’t think so, simply because there just isn’t enough demand to fill all of the units.”

“‘There were still a lot of vacant units in the building, even after we rented that floor,’ Johnson said.”

“After years of painful increases, the cost of renting an apartment in most Bay Area cities has hit a plateau. Andrew Woo, data scientist for ApartmentList.com, attributed the cooling to three factors: the construction of thousands of units of new housing for renters around the region, the typical seasonal slowdown in rent growth at year’s end, and the fact that ‘the market has already gone up so much that it can’t sustain any more rent increases. After a couple of years of scorching rent increases, rents are stabilizing or actually declining in many parts of the Bay Area.’”

“The number of residential property sales in the greater Vancouver region fell by 5.6 per cent in 2016 — including a nearly 40 per cent year-over-year plunge in December alone. ‘The spate of federal and provincial measures has seen the Vancouver market temporarily freeze in its tracks, as buyers and sellers both try to assess the implications for valuations ahead,’ said Avery Shenfeld, chief economist at CIBC Capital Markets.”

“The popular claim that home prices double every 10 years has become a myth, with only Sydney delivering on that promise in the past decade. Forecasters say no city will grow this much in the coming 10 years. Metropole Property Strategists chief executive Michael Yardney said property markets would be fragmented in 2017 depending on local economic strength and supply and demand. ‘The elephant in the room is the huge oversupply of new apartments being completed in Brisbane and Melbourne,’ he said.”

“There is no need to cite statistics to show housing prices in China’s big cities have been too high for ordinary people to afford. Just ask people around you if they are financially strong enough to purchase a new apartment in Beijing or Shenzhen, and most of them will shake their heads suggesting ‘no’ and might even stare at you as if to ask in response, ‘why do you ask such odd questions?’”

“The country’s top leaders are aware of this reality. And that’s why during the recently concluded Central Economic Work Conference they issued a warning, ‘homes are for residential use, not speculation.’ The public, however, might not be fully convinced about the effectiveness of these policies, because many people have got disillusioned over the past decade by the continued rise in housing prices despite policymakers’ repeated pledge that it would be stopped. And if after several months of lull, housing prices in big cities start rising sharply again sometime next year, public grievance would grow and few would continue to believe in the promises of the government.”

“Therefore, the real estate regulation this time is not just a mere economic task, but a must-do political exercise that has much bearing on public confidence in future policymaking of the government. In the eyes of policymakers, the battle to control housing prices is one that cannot be lost. The housing fever has caused serious problems that could trigger a snowballing effect.”

“If housing prices continue to rise at a fast pace, then the bubble in the property market may burst, and China will have to tackle not only a real estate implosion, but also the eruption of a wider financial crisis. As top Chinese leaders participating in the Central Economic Work Conference said, the country must ‘put more priority on prevention of financial risks’ and ‘make efforts to prevent and control asset bubbles’ to ensure no systematic financial risks occur.”

“Financially troubled Miami Heat legend Glen Rice and his ex-wife, former ‘Real Housewives of Miami’ standout Cristy Rice, are engaged in a real estate race against the clock. They are desperately trying to sell their downtown Miami condo before the highrise’s commandoes seize it. The Rices, who are co-owners of a two-bedroom crib on the 27th floor of the Neo Vertika building listed the place for sale a year ago for $460,000, records show.”

“But the Rices have had to lower the price practically on a monthly basis since then, according to MLS listings. Their latest asking price is $330,000, for a condo bought 11 years ago for $317,000. At the time, in 2006, Rice was just two years into retirement after 15 seasons in the NBA — where it is estimated he made $35 million. He was voted to the All Star Game three times and played forward for the Heat from 1989 until 1995.”

“Now, however, Rice, 49, is so broke after losing his fortune in bad investments, his contentious divorce from Cristy and paternity lawsuits that a Miami court recently agreed to reduce his child support payments to a former galpal to $600 from $1,500 a month. The paperwork in that case described how Rice makes a few thousand dollars a year from appearances, memorabilia-signing events, basketball camps and tutoring well-to-do kids in basketball.”

“Which could explain why he and Cristy are accused of being more than two years behind in their $675.50 or so monthly fees at the edgy-looking Neo Vertika. At this point, the condo association’s complaint says the Rices owe nearly $20,000 in unpaid fees, interests and penalties. The association has asked the court to order the condo sold in foreclosure.”