The Housing Bubble

A report from the New York Times. “During the past decade, many U.S. cities have been transformed by young professionals of the millennial generation, with downtowns turning into bustling neighborhoods full of new apartments and pricey coffee bars. But soon, cities may start running out of millennials. The flow of young professionals into Philadelphia has flattened, according to JLL Research, while apartment rents have started to soften in some big cities because of a glut of new construction geared toward urban newcomers who haven’t arrived. Apartment rents in San Francisco, Washington, Denver, Miami and New York are moderating or even declining from a year ago, according to Zillow.”

“‘Certainly the softening of rents is one sign that they are not coming in at the pace that people thought they would,’ said Diane Swonk, an independent economist in Chicago.”

From Bostinno in Massachusetts. “As you learned right here at the beginning of January, the median one-bedroom rent in Boston actually dropped 5.9 percent since the start of 2016 – the first time that’s happened in these parts in quite some time. Zumper has now put together some more information about the rent trends it’s seeing in Boston, complete with a handy heat map showing what neighborhoods have seen rents rise and which have seen things go the other way.”

“Area IV (-12%), Beacon Hill (-10%), and Chinatown - Leather District (-10%) saw the biggest rent declines in 2016. Area IV, I’ve learned, is the Cambridge neighborhood roughly wedged between Central Square, Inman Square and MIT – a pretty prime location geographically speaking. And as for Beacon Hill, I can only assume people just aren’t willing to pay for the relative lack of space if affords anymore? Boston is still the third most expensive rental market in the country, Zumper estimates. And yet the map, which covers 39 neighborhoods, shows a surprising amount of areas that have seen rents go down over the past year.”

The Chicago Tribune in Illinois. “Real estate agents are looking forward to a stronger spring selling season after a lackluster winter. The threat of rising interest rates could prompt potential homebuyers who have been sitting on the sidelines to finally take action, said Jonathan Smoke, economist with Realtor.com. He also said that presently, buying is often cheaper than renting because rents have become so high, but that’s likely to change as rents are cut amid oversupply of new rental housing.”

“The weak housing trends during the last six months seem entrenched and do not appear ready for a major upswing in the next few months, said Geoffrey Hewings, director of the Regional Economics Applications Laboratory at the University of Illinois. Each month he examines home sales and prices collected for Illinois Realtors. ‘I’m very pessimistic,’ he said, noting that weak job growth in the Chicago area and concerns about the state’s huge debts and unresolved budget are stifling housing sales. ‘I feel sorry for people in the realty business.’”

The Miami Herald in Florida. “As residential sales and prices flatten out overall in South Florida, the luxury real estate market is taking a beating. A strong dollar, economic instability in Latin America and overbuilding have hit luxury real estate much harder than other parts of the market. ‘We have more luxury inventory than we’ve ever had in our history,’ said Ron Shuffield, president and CEO of EWM Realty International. ‘And sales are as low as they’ve been for several years.’”

“Sellers are cutting their demands, especially for condos, industry data show. For instance, Douglas Elliman found that Miami condo prices dropped 32 percent year-over-year in the fourth quarter. It’s either sell below asking or wait …. and wait … for better days. On the Beach, the number of days luxury condos spent on the market ballooned from 62 to 171 over the last year. That’s partly because of the competition from new construction.”

From Realtor.com on New York. “The long-awaited opening of the Second Avenue Subway has not helped singer Ricky Martin sell his Yorkville condo. After failing to find a buyer, the singer has had to slash the asking price of his 3,147-square-foot condo, which has been on the market since October, from $8.4 million to $7.1 million. His pad is located at 170 East End Ave., a Peter Marino-designed luxury condominium overlooking Carl Schurz Park in the Upper East Side’s Yorkville neighborhood, close to the East River.”

From SF Weekly in California. “The New York Times found room over the weekend to do something else it also does very well: troll San Francisco. With a headline that reads like a plaintive cry à la Children of Men, the NYT ventriloquizes one facet of the housing issue: ‘San Francisco Asks: Where Have All the Children Gone?’ It’s by no means an offensive question to ask; the Chronicle basically wrote the same article last week. Both pieces reference the same Planning Department report, issued on Jan. 17, that puts S.F.’s share of families with children under 19 at the lowest of every Bay Area county as well as a sampling of large cities nationwide. But the conclusions the Times drew are, at best, facile — and also reflect their penchant for jabbing a stick at S.F.’s eccentricities for sport.”

“First — and this is a sin the Chron commits, too — just because there are 120,000 dogs and 120,000 children in S.F., values-based comparisons are silly. The Times does imply something’s not right in the housing mix, when dropping this amazing stat: ‘For every 100 apartments in the city sold at market rates, the San Francisco school district expects to enroll only one additional student.’”

“Is it possible that San Francisco has fewer children than it should because 70 percent of dwellings with three bedrooms or more are currently occupied by adult roommates, while in a more rational housing market, families would live there instead? Or maybe our obsession with building luxury housing has actually yielded many uninhabited units nominally ‘occupied’ by hyper-affluent people who actually reside elsewhere?”

A report from Metronews in Canada. “Despite a recent slowdown in Vancouver’s housing market, developers are maintaining their rosy view for the industry in 2017. Vancouver’s single family detached market has slowed considerably, and seen downward price adjustments, following the province’s introduction of a tax on foreign buyers last July. The policy move came after home prices in some areas rose more than 40 per cent. Brian McCauley, president of Concert Properties, pointed out that Metro Vancouver condo sales rose 52 per cent in 2016, and prices rose 22 per cent in the last quarter of 2016 compared to the same period one year earlier.”

“He did acknowledge that 13,000 condos were sold in the first half of 2016, compared to 6,000 in the second half of the year. ‘You can draw your own conclusion,’ he said.”

From Globes Israel Business News. “Prices dropped 3.8% in the third quarter of 2016 in Ra’anana, and fell further in October-November. ‘We’re already no longer in a housing market with rising prices. Prices in Ra’anana, for example, are on a downtrend,’ a developer in a National Outline Plan 38 company active in the town said several weeks ago at a real estate conference on urban renewal. ‘It is more difficult today to sell housing in Ra’anana,’ another developer active in the city said on different occasion. When contractors and developers say prices are going down, it is worth paying attention.”

“In order to understanding what is happening in Ra’anana, a city that has had the highest housing prices in the Hasharon area for many years, we examined the demand prices, the actual deals, the trends in recent months and years, and the planned future inventory. The results indicate that something is indeed happening in the pearl of the Hasharon area.”

From The Namibian. “First Capital Treasury Solutions yesterday echoed FNB Namibia’s announcement of an expected slowdown in house price growth. Milner Siboleka, First Capital assistant portfolio manager and economist, told The Namibian that over the years house prices have grown faster than the fundamental indicators of national income that support demand in the country.”

“‘This has prolonged for a long time; hence chances of slowing price growth are inevitable this time around given the present dwindling trends of factors that support demand. In any given case a rapid price growth that is faster than the growth of population incomes is unsustainable over time,’ said Siboleka.”

The Malaysia Chronicle. “The high-end residential segment, particularly strata units, is heading towards a price correction this year after a rapid rise in prices driven by the now-banned Developer Interest Bearing Scheme (DIBS). Some of the units bought with DIBS and other forms of rebates are back in the market today, at prices that are much lower than the original selling prices two years ago, and CBRE-WTW managing director Foo Gee Jen said this is particularly apparent in Johor Baru, Kuala Lumpur and Kota Kinabalu.”

“Foo observed that sellers are a lot more realistic today and the gap between asking and concluded prices is narrowing. ‘I believe strongly that the price correction has started. A lot more developers are taking note of that. A lot of them are suffering, some of the high-end products are not moving and if you go into their showroom it is very quiet.’”

The Australian Financial Review. “The large crowds of Chinese buyers prowling at auctions during the peak of the recent Sydney and Melbourne residential boom have all but disappeared, but property agents and lenders say they have not gone away. Chinese buyers featured prominently in the east coast boom of 2012 to 2016 but local banks’ clampdown on foreign lending, China’s capital transfer restrictions and the Foreign Investment Review Board’s surveillance of rule-bending Chinese buyers have pushed many out of the Australian market in the past year.”

“China’s increased control on foreign exchange at the end of 2016 did not help. Chinese property website ACProperty has experienced a 30 per cent fall in inquiries, and while Chinese interest was still high, the ‘time taken to commit’ was longer, co-founder Esther Yong said.”

“Even the luxury market – where funding is generally not needed – has been hit hard. Chinese luxury agent House18’s Michael Zhu said one of his clients, with strong credentials, took two months to clear his purchase of an $8 million home with FIRB. In the end, the vendor backed out of the sale. Mr Zhu said there had been a 20 to 30 per cent drop in clients.”

“But many potential buyers are preparing for the next round of investments in Australia, off the plan platform iBuyNew chief executive Mark Mendel said. ‘Active investors are still keen to buy and they are educating themselves on finance opportunities outside the market. For the rest if the banks start lending again, they will be back tomorrow, 100 per cent,’ he said.”