The Housing Bubble

It’s Friday desk clearing time for this blogger. “Condos and single-family homes spent more time on the market and sold for a bigger discounts as luxury homeowners have begun to face reality in South Florida. The fourth quarter Douglas Elliman reports show the more than yearlong slowdown in Miami and Miami Beach’s luxury market is continuing, with Boca Raton and Fort Lauderdale as bright spots in the overall South Florida market. ‘For deals to happen, the sellers are traveling a lot further to meet the buyer in price than they were a year ago,’ Jonathan Miller, whose firm Miller Samuel authors the quarterly reports for Douglas Elliman, told The Real Deal. The median sales price of luxury single-family homes dropped by 56.4 percent to $5.45 million, according to the report.”

“Across the board, that market saw an increase in listing inventory, especially condos. Sellers in Miami are ’still anchored to 2014 prices,’ Miller said. He thinks it could take about two years for sellers to ‘break their anchor to the prior market. The seller is in mourning for not getting the price they wanted,’ Miller told TRD.”

“Awards season is upon us, but it appears Oscar-winning director Kathryn Bigelow has a few others things on her mind. Bigelow is attempting to part ways with her Tribeca condo. The producer and director bought the two-bedroom, two-bathroom apartment in 2015, doling out $3.03 million for the 1,665-square-foot pad. Oddly enough, it appears Bigelow isn’t trying to make a profit on the place—it’s now on the market for a mere $2.895 million, so even if it sells at full ask, she’ll be taking a loss. We wonder why Bigelow is so eager to rid herself of the loft.”

“Luxury residences in Greenwich, the Connecticut town that’s home to hedge funds and Wall Street executives, sold at a quicker pace in the fourth quarter as owners became more amenable to negotiating on price. The 16 luxury homes that traded hands in the fourth quarter did so at an average discount of 6.4 percent off their last asking price, compared with an average 5.5 percent reduction a year earlier. ‘The big challenge in Greenwich at the high end is that the sellers remained disconnected from the market,’ Jonathan Miller, president of Miller Samuel, said in an interview.”

“The real estate market here is facing some significant headwinds, with the local/middle income segment recording a decline of about 40 per cent in transactions over the past ten years despite a weakening in property value. Chief Operating Officer of Terra Caribbean Hayden Hutton said confidence among Barbadians remained low, contributing to low real estate sales in the local segment of the market over the past ten years. The luxury/foreign market also recorded a steep 29 per cent decline in value since 2007, he added.”

“‘The problem is that most of the inventory was built at 2008 prices and those buyers are simply not there,’ Hutton said.”

“A survey of the FipeZap index shows that the average residential rental prices in Brazil had a nominal fall of 3.23 percent last year. Considering official inflation measured by the Broad Consumer Price Index, the average value of a lease fell by 8.95 percent in 2016. Rio de Janeiro had the largest decrease in the average rental price in 2016, with a drop of 6.21 percent (before considering inflation). Sam Flowers, an American expatriate renting in Rio for over seven years shared, ‘I am not surprised to see a decrease in rents in Rio and I think they are likely to decrease a little further after Carnaval. There is more supply than demand and that will continue for at least the first half of 2017.’”

“Dubai apartment prices dropped an average of 11 per cent last year as the market tackled tough economic conditions, according to property site Bayut.com. Rents were less affected but still dipped 6 per cent from their 2015 average. ‘With prices having levelled out and rents rationalising, the real estate markets in the two main emirates appear closer to maturity than ever, where inflationary and haphazard overnight gains are quickly becoming a thing of the past,’ the company said.”

“As recession continues to bite harder, Roland Igbinoba, president of Pison Housing Company and MD/CEO of FHA Mortgage Bank, says the default cases in the Lagos rental market have risen by 71 percent. ‘Out of a sample size of 3,700, 71 percent of people in Lagos State who are renting are in default because the rent is going up and there is recession,’ Igbinoba said.”

“Ernest Cheong, who has been a chartered property surveyor and consultant in Malaysia for more than 40 years, has advised prospective house buyers to wait until property prices come down, saying making a purchase at current prices and in the face of a bleak economic outlook would be like committing suicide. He advised the public to shed the widespread belief that only house ownership could guarantee a roof over a family’s head. Families could still live in rented homes, he said.”

“‘To make matters worse,’ he told FMT, ‘you have so-called property gurus encouraging families to buy homes they may not be able to pay for in the long run, claiming it is an investment since property prices don’t go down. What happens when you can’t afford to pay the instalments and can’t sell the property off, or if rental values can’t cover instalments? You’ll be stuck.’”

“He said it would be more sensible to rent a house than to buy one in times of economic uncertainty. ‘Sure, you could rent out the house you bought and rent a cheaper place to live in, but the question is whether you can find someone to rent your place for RM2,000 or whether you can rent it out at such a rate when we have an oversupply of houses, like we do at the moment.’”

“A first home buyer has lost a $41,000 deposit on a St Kilda apartment after the National Australia Bank walked away from the loan at the last minute arguing the property was too small. In a further sign that banks are tightening lending standards to high-risk segments of the property market, 20-year-old Alexander Tashevski-Beckwith said he was left without the deposit he paid and is on the hook for further tens of thousands of dollars in vendor fees after the bank reneged on the loan a day before settlement.”

“‘They haven’t even left me with time to renegotiate another loan,’ he said. ‘I’m in this terrible financial position right now.’ The science student said he had been studying part-time to save up money for the deposit. ‘I jumped through all the hoops, I did everything they wanted me to, then at the end of the day they ripped the rug right out from under me.’”