The Inescapable Conclusion
It’s Friday desk clearing time for this blogger. “Uncertainty around the election spooked wealthy home buyers in the fourth quarter, continuing 2016’s slowdown in luxury real estate, according to several new reports. Sales in the Hamptons, Aspen and Los Angeles fell by double-digit percentages in the fourth quarter, as the supply of unsold homes grew and prices came under pressure, according to market reports Douglas Elliman and Miller Samuel Real Estate Appraisers & Consultants. In the Hamptons, the high end of the market was especially weak, bringing the average sale price down 30 percent, to $1.7 million. The median price fell 7 percent, to $925,000.”
“The average sale price for the Hamptons’ luxury market — the top 10 percent of sales by price — fell 43 percent to $7.06 million. Meanwhile, inventory surged 21 percent. In Aspen, the number of sales fell 25 percent, and the average sale price dropped to $3.75 million — an 11 percent decline. Like most big markets over the past year, the top of the market suffered most, with the average price for luxury homes there sliding 24 percent. The median price also tumbled, falling 29 percent.”
“With the exception of the Danbury area, southwestern Connecticut’s high-end and luxury markets did not see much activity in the fourth quarter of 2016, a trend that some real estate agents say could continue into 2017. ‘The abundance of inventory in the higher-end communities of the lower county remains a challenge,’ William Pitt Sotheby’s International Realty’s report stated. ‘Since more inventory in the luxury sector will inevitably come to the market out of many a homeowner’s need to sell, we expect the downward pressure on prices to continue well into 2017.’”
“Plagued by swelling inventory and sagging sales, Miami-Dade County’s supply of luxury condos – defined as those priced at more than $1 million – stood at 2,549 by the end of 2016, according to EWM Realty International. At today’s sales pace, it would take 57.9 months to sell them all, a 69% surge over the months of supply recorded at the end of 2015. That’s by far the highest backlog since the end of 2008, when the end of a building boom collided with the recession, briefly sending the supply in that category to a dizzying 80 months.”
“The inescapable conclusion, says Ron Shuffield, EWM’s president: Prices for luxury properties have to come down. ‘In the short term the only fix is to lower prices to be in line with their expectations, because right now there’s more supply than demand,’ he said.”
“For years, the Bay Area’s mismatch between supply and demand in housing has been an increasingly challenging problem. But as thousands of new units come online in 2017, the dynamics of the region’s housing market may be shifting slightly. Currently, San Francisco is experiencing the biggest apartment building boom in more than 75 years. Thousands of new apartments and condos are coming online in the Bay Area in 2017.”
“The increased supply is ‘definitely impacting rents,’ according to Patrick Carlisle, chief market analyst for Paragon Real Estate Group. Specifically, he’s seen a 5 to 10 percent drop since the peak of the market in 2015. ‘How much further they’ll fall, I don’t know,’ Carlisle says. ‘But I’ve heard from rental agents that in the past few years through 2015, people were lined up waving cash in the air to get apartments. But now we’re seeing some apartments stay vacant for months.’”
“The region has seen condo prices dip in 2016, in particular in areas where big projects are being built, according to Carlisle. ‘At the same time that we’re seeing greater supply, demand has started to cool down,’ he said. ‘As a result, (condo) prices have come down 2 to 5 percent since the end of 2015.’”
“More signs that Dallas-Fort Worth’s high-priced home market may be running out of steam: Homebuilders are shifting gears to build more affordable houses and holding back on pricey ones. ‘We continue to see a slowing of demand in the price ranges above $400,000,’ housing analyst Metrostudy reports in a new study. ‘With every quarter, demand for new homes above $400,000 wanes.’”
“A mismatch between what builders are offering and what customers want to pay is affecting the market, Metrostudy analysts say. Paige Shipp of Metrostudy said she recently looked at the price of new houses in the booming Collin County town of Celina. In 2013, a 3,000-square-foot house in Celina cost an average of about $251,000. ‘Today, that same house would cost you $389,000,’ she said. ‘It’s amazing how prices have gone up.’”
“A petition calling for a Calliope workers camp to be shut down was launched at the weekend. The Observer reported in July that estate agent Alicia Williams was also calling for its closure. ‘There is just no need for those camps anymore, now the construction is over and the workers are here for maintenance,’ Ms Williams said. ‘There is a complete oversupply of houses and from the community point of view they should be putting money back into our local economy. A lot of people out there are in financial stress and don’t know what to do.’”
“Housing sales volumes in Namibia have dipped considerably in a market that has enjoyed one of the world’s fastest-growing property prices for years. ‘The more affluent Angolans bought houses in the most expensive suburbs like Ludwigsdorf, Klein Windhoek and Auasblick, where house prices can reach up to N$20m (US$1.5m). We experienced instances where youngsters brought in their full inheritance from deceased parents and spent all on fancy houses.’ said Lourette Liebenberg – the principal consultant at real estate agency Rightmove Properties.”
“Dr Roman Grynberg, a professor of economics at the University of Namibia, said this fall in demand is mostly being felt in the middle to top end of the housing market. ‘Prices have now started to fall. I mean, I bought the house I’m living in almost two years ago – it would be worth at least 10% less than what I paid for it,’ he estimated.”
“In the Wall Street Journal article ‘Three Economists Walk into a Bar,’ James Mackintosh discusses the shortcomings of modern day economists. Mackintosh writes, ‘This is where the biggest difference from meteorology comes in: Weather forecasts don’t change the weather, but economic forecasts can change the economy.’ When Janet Yellen hints that the Fed is going to raise rates during the next FOMC meeting, the market reacts.”
“At this point, either the Fed cannot see the bubbles coming, or it’s allowing them to occur intentionally. The Peter Schmidt article, ‘Do Central Bankers Know a Bubble When They See One?’ discusses how the Fed misuses their capabilities and ultimately breaches its intended purpose. Schmidt writes, ‘Senior Fed officials taking positions diametrically opposed to positions Alan Greenspan claimed formed the basis for the Fed’s policy toward bubbles, namely, allowing bubbles to burst and dealing with the consequences later.’”
“This means that the Fed aims to be incredibly shortsighted. It chooses to make the economy look good at the moment and deal with the consequences after the fact. The issue is that the American people are the ones who shoulder those consequences, not the Board of Governors. The greatest piece of advice comes from within the Fed itself. The Fed needs to get their fingers out of the market.”
