January 30, 2017

A Pricing Bubble Where Developers Paid Top Dollar

A report from the Herald Tribune in Florida. “International buyers still love Florida real estate, but their passion is fading. Foreign buyers spent $4.3 billion less on residential real estate in the Sunshine State last year, an 18 percent plunge. With shrinking buying power, foreigners are spending less here. The average price they paid for a Florida residence dropped from $539,000 in 2015 to $412,000 last year. Agent Charryl Youman said she saw fewer Canadian buyers last year, but more sellers reacting to the unfavorable exchange rate with the loonie. Canadians like maintenance-free living at condos and villas, but both sale prices and monthly fees jumped about 30 percent.”

“‘Imagine if your condo fees were $300 per month, and now they feel closer to $400 per month,” said Youman, who is with Berkshire Hathaway HomeServices Florida Realty in Venice. ‘Condos costing $200,000 to buy now translate to almost $260,000. That’s a big difference.’”

From Mansion Global on New York. “Only 13 homes valued at $4 million and above entered into contract last week in Manhattan, the lowest number for the final week of January since 2010, according to Olshan Realty’s weekly report. ‘The market is struggling with price resistance,’ Donna Olshan, president of the eponymous brokerage Olshan Realty told Mansion Global. ‘Fundamentally, there are too many overpriced high-end products. The buyers are really looking at the prices carefully. In order for the market to move, a lot of properties have to reduce prices.’”

From Multi-Housing News. “A new survey from Capital One reveals that multifamily professionals have mixed expectations for supply and demand in their markets this year. ‘We closely watch planned and permitting numbers across the country and monitor areas with a lack of supply,’ said Jeff Lee, executive vice president of Capital One’s multifamily finance. ‘There are no doubt some cities where overbuilding is a problem, as evidenced by the 38 percent of survey respondents who said that they anticipated supply to outstrip demand to some degree.’”

“In the survey of more than 130 industry pros, only 16 percent of survey respondents expect supply and demand to be in equilibrium this year, while 46 percent anticipate demand to outstrip supply, and 38 percent predict supply will exceed demand. ‘One thing that stood out for me was that 51 percent of the respondents said that they were going to be a net buyer in 2017,’ Lee said. ‘This was surprising, given the anticipation of rising interest rates. In a broader sense, the results also made it abundantly clear that there is an expectation among professionals that the multifamily market has additional room to grow.’”

From 4 WWL in Louisiana. “After record growth in the metro area housing market post-Hurricane Katrina, 2016 saw a slow-down. Experts called it a ‘leveling’ off. Although the rent landlords will be able to get may not be as high as in years past. With more inventory and newer apartments with more amenities, rents have decreased. ‘Even uptown we are seeing apartments that were leasing for maybe $1,800 last year are now sitting on the market far longer and leasing for only around $1,600,’ said Remax agent Martha Eager-Allen. ‘So there is a correction taking place and I think owners should be aware of that.’”

The Houston Chronicle in Texas. “Greater Houston homebuilders face a slow-moving market in the year ahead, followed by increased activity in 2018. But there may be speed bumps along the way as the industry rebounds from the sluggish growth during the recent oil bust just as crude prices stabilize, a housing analyst said. Even with mortgage rates hovering around 4 percent - low by historical standards - only about 28 percent of Houston-area households can afford an average-priced new home, which is about $391,000, said Scott Davis, head of the Houston office for Meyers Research, a residential consulting practice based in southern California. ‘Given some of the more expensive inventory moving more slowly in the market, and staring at a potential increase in rates, this is an important issue for us to stay on top of,’ Davis told builders.”

“Communities that opened over the last several years when land and lot prices were high won’t fare as well as those that come online in 2017 or later, when prices are expected to moderate, Davis said. He warned of a ‘pricing bubble’ in those older projects where developers paid top dollar for the land. With high inventories in those developments, Davis said, ‘we’re going to see that slowly deflate,’ he said.”

From My Central Jersey in New Jersey. “Almost 11 months after New Brunswick passed an ordinance to combat the large number of vacant homes in the city, no part of the ordinance has been enforced. The Abandoned Properties Rehabilitation Ordinance, passed on Feb. 3, 2016, and enacted on 20 days thereafter, requires that the city designate a public officer to identify abandoned properties, draft a list of abandoned properties in need of rehabilitation, and submit a report to the city’s mayor detailing the location, status and actions taken to rehabilitate qualifying properties.”

“In a response to a request made under the Open Public Records Act for the documents, other vacant property lists and plans of rehabilitation submitted by property owners of vacant or abandoned homes, assistant city attorney Joe Catanese wrote that no such documents exist.”

“Per 2015 census estimates, there are between 1,173 and 1,663 vacant homes in the city, roughly 9 percent of the city’s total housing units. City Public Information Officer Jennifer Bradshaw confirmed that a list, as called for under the ordinance, had not been drafted and that no public officer had been named. ‘We’re still in the process of setting up a model for the ordinance to operate under as well as staff a position to oversee it,’ Bradshaw said in a statement. ‘So at this time, there isn’t a staff person to compile a list, nor one to provide updates on.’”