The Housing Bubble

A report from The Signal in California. “Real estate may still be the best long-term investment, but first-time homebuyers are finding it more difficult than ever to grab onto the first rung of the ladder, partly because owners simply are not selling, opting instead to stay put. Ultimately, that may yield what is known as a ‘European model’ of homeownership, where children inherit a home from their parents and property stays within a single family over multiple generations. The California market isn’t there just yet, but that could be what the future looks like here unless more homes are built, said Leslie Appleton-Young, the chief economist of the California Association of Realtors.”

“‘Seventy-one percent of Californians over age 55 have not moved since 1999,’ Appleton-Young said. This creates a ‘huge problem for first-time buyers who want to move into one of those properties.’ With little new construction underway and fewer chances to buy, former residents of California are gobbling up properties elsewhere. Seventy percent of home sales in Austin, Texas, 40 percent in Raleigh, N.C., and 30 percent in Portland are completed by folks from, guess where — sunny California.”

The Austin American Statesman in Texas. “Central Texas home sales and home prices hit record highs in 2016, the Austin Board of Realtors said Wednesday. It was the sixth straight year of record sales and prices in the Austin metro area. ‘The Central Texas housing market is slowly beginning to align with long-term historical trends,’ said Brandy Guthrie, president of the Austin Board of Realtors. ‘Homes are spending more time on the market and the pace of both home sales and price growth is slowing. This normalization does not necessarily mean a weakening housing market, but a return to less aggressive market conditions.’”

“In recent months, some agents said they felt the market had cooled some from its feverish pace in the past few years. But Robin Rhoads, an agent with JB Goodwin Realtors in Austin, said homes that are priced right and in desirable locations are still getting multiple offers. If a home is sitting rather than selling, she said, ‘it’s usually because it’s overpriced.’ ‘I think some sellers are overzealous, or they tend to not really understand that all houses are not created equal,’ Rhoads said.”

The Denver Post in Colorado. “Average apartment rents in metro Denver fell for the second quarter in a row in the fourth quarter of 2016 as the market struggled to absorb a record number of new units, according to the Denver Metro Area Apartment Vacancy and Rent Report. Average apartment rents fell from $1,371 in the third quarter to $1,347 in the fourth quarter, marking the largest quarterly drop in the 36 years the report has been conducted. Median rents stayed flat at $1,329 per unit.”

“As average rents fell, the apartment vacancy rate shot up from 5.1 percent in the fall to 6.2 percent. While apartment vacancies tend to rise in the fourth quarter, the rate is now its highest since 2010, said Mark Williams, executive vice president of the Apartment Association of Metro Denver, in the report. ‘In 2010, only 498 new apartment units were built in the entire city. Fast forward to 2016 and we’re seeing that same number being delivered every three weeks in Denver,’ Teo Nicolais, a Harvard University instructor who specializes in real estate, said in the report.”

From Fox 17 West Michigan. “Grand Rapids first got its name from the rapids of the Grand River. Now, the city is becoming more known for beer and its rapid growth. Housing options are growing faster than ever before, creating an inventory of thousands of units near downtown Grand Rapids that will eventually need to be filled. But will the demand arrive as quickly as the supply? FOX 17 spoke with several downtown developers about the growth in the downtown area, but it turns out that adding to the city’s skyline doesn’t always mean success at ground level.”

“‘There is concern in the market place for the high-end market rate apartments,’ said John Wheeler, president of Orion Real Estate Solutions, ‘especially the bigger ones the big two- and three-[bedroom apartments] — you know, at $2,500 or $3,000 a month. People say I’d rather by a $350,000 house.’ What happens if the apartments don’t fill up? ‘My theory is apartments will always fill,’ Wheeler said. ‘It’s just how low you have to lower the rent to get the people in.’”

The Real Deal on New York. “Which asking price will get whacked this week? Two adjacent co-ops belonging to ‘The Sopranos’ creator David Chase received one of the biggest price reductions in the city’s over-$10 million market during the past week. The penthouses at London Terrace were listed last year for $16.5 million, but are now asking a more subdued $14.9 million. In total, 13 ultra pricey pads received reductions of more than 5 percent in the period between Jan. 9 through 15, according to data from StreetEasy.”

“795 Fifth Avenue, 2204 - Previous Price: $25.9M - Current Price: $22.5M - Percentage Drop: 13 percent. Back in May 2014, this four-bedroom co-op hit the market for an ambitious $33 million. But that was back when ultra-luxury pads were selling like hot cakes, and sellers had high hopes for what their apartments could (and often would) fetch. In October 2014, the asking price was shaved back to $29.9 million, where it sat for nearly 18 months. In March last year, the price was slashed to $25.9 million. Last week, it was dropped again by 13 percent, and is now asking $22.5 million.”

“12 East 13th Street, Penthouse - Previous Price: $20M - Current Price: $18.5M ($3,243 per square foot) - Percentage Drop: 8 percent. This 5,700-square-foot triplex apartment at DHA Capital and Continental Properties’ 12 East 13th Street hit the market in November 2013 for $28.4 million. Seven months later, the asking price was lifted to $30.5 million, and then dropped last November by $10 million to $20 million. It’s now on the market for $18.5 million. DHA Capital and Continental Properties paid $32 million for the 45,000-square-foot property in 2012. Apartments in the building hit the market in 2013, ranging from $7.5 million to $28.5 million for the top triplex.”

“Steven Fisch, of Continental Properties, told the Wall Street Journal at the time that the companies were seizing on the limited supply of ultra luxury properties in the city. ‘It’s a very different market now,’ said Compass’ Herve Senequier. ‘Properties above $15 million have received pricing adjustments, and the price now makes more sense.’”