January 18, 2017

The Only Thing That Can Happen

A report from the San Francisco Business Times in California. “The increasing inventory coming onto San Francisco’s condo market has some experts warning about a ‘condo glut.’ Condo supply in San Francisco was up by 70 percent in 2016 compared to 2012, with roughly 1,000 units on the market and more than 2,000 condos under construction. San Francisco hasn’t seen this level of condo inventory on the market since 2008, when 2,069 units came on the market. According to Paragon Real Estate Group, prices for condos have plateaued or slightly dropped in average dollar per square foot values. This is mainly attributed to general economic factors and not any significant market crash.”

“While condos still made up a majority of home sales in the city in 2016, the data from Paragon does show a slowdown among the top end of luxury condos, owing to the new inventory coming onto the market.”

The Post Independent in Colorado. “Reports and newsletters trickling in last week confirmed what Aspen-area real estate watchers already knew: The market was down significantly in 2016. And compared with 2015, it was down indisputably. That year, Pitkin County’s total sales volume broke the $2 billion barrier, the first time the mark had been eclipsed since the Great Recession. Pre-recession, county real estate sales topped $2 billion three times — in 2005 and 2007, as well as the record-setting $2.64 billion in 2006.”

“In 2016, total sales neared $1.4 billion, according to Land Title Guarantee Co. and Aspen Times research of public records. Compared with those $2 billion years, the drop-off was significant. But 2016 was, on its own, still a solid year, brokers said. ‘2015 was on another level,’ said Raifie Bass of Douglas Elliman Real Estate’s Aspen office.”

“Aspen, the backbone of Pitkin County’s real estate industry, ended five consecutive years of increased sales volume in 2016, noted broker Andrew Ernemann in his monthly newsletter issued last week. Total sales in Aspen dropped 39 percent, Ernemann reported. The slower market spurred an 18 percent rise in Aspen’s inventory, with the average seller capturing 93 percent of the listing price, Ernemann said. Aspen’s average single-family home price was nearly $6.6 million from January through November of 2016, according to Land Title Guarantee. For the entire 2015, it was nearly $7.7 million. Sales transactions solely in Aspen also dropped from 323 in 2015 to 202 in 2016, brokers James Benvenuto and Jennifer Houston said last week in their annual market report.”

The Baton Rouge Business Report in Louisiana. “Experts are forecasting a cooling-off period for Baton Rouge’s student housing market in 2017, following a years-long boom that has led to a spate of apartment developments throughout the LSU area. Currently, Baton Rouge is one of the strongest markets in the country for student housing, says LSU Real Estate Research Institute Assistant Director Brian Andrews. There has been a good deal of new construction in recent years.”

“But that growth, and corresponding high unit prices, are not expected to last, Andrews says. LSU is increasing its presence in the market. That, coupled with an unsustainable amount of construction, will make for some belt-tightening, he says. ‘That’s not good news for some of the people that are out there catering to the student market,’ Andrews says. ‘You have a stagnant number of people looking for an increasing number of housing units. The only thing that can happen is for rents to go down.’”

The South Florida Business Journal. “A company managed by the head of private equity firm Apollo Management took a $4 million loss on the sale of a condo in Miami Beach’s Faena House. It marks one of the few times that a condo buyer in the recent development cycle has sold for a significant loss. Completed in 2015, Faena House sold condos at some of the highest prices per square foot in Miami-Dade County.”

“OFH LLC, managed by John J. Hannan, sold the 4,381-square-foot Unit 9-A in Faena House for $12.5 million. The price equated to $2,853 per square foot for the condo, which has four bedrooms and 6.5 bathrooms. Hannan’s company paid $16.5 million, or $3,766 per square foot, for the condo in September 2015. He is the founder and chairman of Apollo Management, which has over $180 billion in assets under management.”

From Bloomberg on New York. “A condo tower rising in what’s billed as Manhattan’s newest neighborhood reported that more than a quarter of its 285 units have sold since marketing began in September, a sign that local buyers are willing to commit to the borough’s far west side. The increase in deals, coinciding with a stock-market euphoria and developers’ greater price flexibility, follows a year in which luxury contracts fell by 18 percent from 2015, said Donna Olshan, president of the brokerage.”

“‘Developers are coming around to the notion that they absolutely have to negotiate or they’re not going to get a deal done,’ said Olshan, who isn’t involved with sales at the Hudson Yards tower. ‘Many developers are taking offers 10 or 15 percent below asking, but they don’t want to cut the price. They’re whispering in brokers’ ears, ‘Make me an offer.’”