The Housing Bubble

It’s Friday desk clearing time for this blogger. “The mansion on Fallen Leaf Road in the secluded Upper Rancho neighborhood of Arcadia has all the trappings a wealthy buyer from China could want. Yet two months after it was placed on the market, the house remains unsold. Not long ago, real estate like this would have been snapped up almost immediately. ‘It would have been gone in two weeks with multiple offers,’ said Dee Chou, the property’s listing agent.”

“Median home prices have dropped in Arcadia to $930,000 at the end of last year from about $1.1 million at the start of 2015. In San Marino, the median price for a home was $2.5 million as recently as the second quarter of last year before tapering to $2.2 million by the fourth quarter. Agents say the city is left with a surplus of luxury properties whose sellers could face pressure to reduce prices. One agent said her client had to drop his asking price for a property in Arcadia last summer to $8.3 million from $10 million because it drew no interest for three months. ‘All agents are crying that the money isn’t coming,’ said Sanne Lee, an agent for A + Realty & Mortgage in Rowland Heights.”

“The CEO of fashion retailer Theory finally sold his penthouse at the Setai Miami Beach for $8.5 million, at a 38 percent discount from its 2015 asking price. Andrew Rosen paid $8.6M for the unit in 2013, which means he sold it at a loss. It was recently renovated. The buyer’s agent Luciana Barreto said an identical unit on the 35th floor sold for $12 million in March 2014.”

“With rental vacancies in Gillette the highest in at least 15 years, local officials aren’t shocked that the housing and real estate markets also are down in a slumping economy. Campbell County saw a new 10-year low of homes sold in 2016. According to data compiled by Steve Laakso of ERA Priority Real Estate, there were 581 homes sold in 2016, the lowest since at least 2007. The drop comes after a 10-year high of 905 homes sold in 2015, he said.”

“Corresponding to low home sales, foreclosure numbers were up, from 71 in 2015 to 83 in 2016. Laakso said that number can be misleading and he expects it to be even higher in 2017. ‘Eighty-three isn’t a huge number by any means, but there’s a lot of lag time in foreclosures by the time someone turns their keys in, the bank gets around to doing their job and getting it back on the market and sold again,’ he said. ‘So I anticipate that number to be up this year.’”

“In 2016, for a second consecutive year, the glut of properties owned by banks after borrowers defaulted shrank in Ohio and some surrounding states, according to the Cleveland Federal Reserve. But the Mansfield metro/Richland County area was among a small number of locations in multi-state region that did not fully share in that bit of economic sunshine.”

“Mansfield also was the only metro in the Fourth District that had yet to regain its median value of purchase and refinance originations from before the housing crisis, still 3.51 percent below its 2005 level, the Fed report said. ‘The data suggest that banks have been more willing or more able to sell their properties of late,’ said Brett Barkley, senior research analyst with the Federal Reserve Bank of Cleveland. ‘Some may have held onto them, waiting for housing values to recover before selling them.’”

“Home owners selling their properties are being forced to slash their prices after slow growth in the housing market amid Brexit uncertainty. Among London’s more affluent areas, as many as 35 per cent of properties on the market have been reduced. A luxury townhouse in Highgate has come down by a whopping £2 million to £6.95million. Trevor Abrahmsohn, managing director of Glentree told The Times: ‘The original price wasn’t fanciful but the market started falling.’”

“Evidence is mounting that Tokyo’s housing boom is nearing an end. In the Kachidoki area facing Tokyo Bay, home to the city’s hottest market given its proximity to venues for the 2020 Olympic Games, real-estate broker Hayato Jo has a wall full of notices of apartments for sale, with a 20 percent increase in the number of people looking to sell in the area in the past year. Prices in the neighborhood, which surged 25 percent since Tokyo won the Games in 2013, have started to fall from their peak.”

“Elsewhere, more cracks are appearing. The number of unsold new apartments in the city reached the highest in seven years in 2016. Inquiries from Chinese investors, who helped fuel property market gains, have halved since August 2015, according to Noboru Takimoto, senior manager of overseas residential sales at Jones Lang LaSalle K.K. ‘Inventory is climbing and the property market has already started to deteriorate,’ said Deutsche Bank real-estate analyst Yoji Otani. ‘This year we will see the pace accelerate. There is no demand. No one can afford properties, only rich people. There is no way to help this market.’”

“The Costa Rican Prosecutor’s Office has opened up an investigation into real estate developer Homes Grupo Inmobiliario after complaints of consumer fraud have surfaced. Daniel Quesada, a spokesman for the Prosecutor’s Office, told The Tico Times in an email that Homes Grupo Inmobilario took deposits for the three development projects from clients looking to reserve a condo. However, after long delays and unfulfilled promises on the part of the company, clients would then make calls and send emails to numbers and addresses that didn’t exist or had been deactivated, the spokesman said.”

“Quesada added that the company was offering clients a discount of up to 20 percent of the property’s value if buyers paid the cost of the property’s premium right away. Would-be homeowners lost as much as $50,000, according to Quesada.”

“Almost as quickly as he burst onto the East Village real estate scene, notorious landlord Raphael Toledano is on his way out of the neighborhood. The 26-year-old’s lenders filed court papers to foreclose on all 15 of his properties there this week. Madison Realty Corp. is foreclosing to recoup $140 million — of which just under $125.1 million is in loans against the properties — according to the foreclosure statement.”

“The foreclosure isn’t exactly a surprise to the parties involved or anyone else familiar with New York real estate, according to a source familiar with the industry. It’s merely business as usual for Madison Capital, which often operates on a ‘loan-to-own’ philosophy, said the source, who requested anonymity. It’s a win-win for Madison — either Toledano pays back his loan at the huge interest rates he signed up for, or they walk away with more than a dozen new properties in the East Village.”

“‘They are lending money,’ the insider explained, ‘but fully anticipate that the loan may not be paid back and are happy to go through the foreclosure process to own the properties for the money they lent.’ On top of that, Toledano ‘did all the dirty work’ of clearing and renovating apartments, the source said.”

“Toledano’s exit from the Village doesn’t mean locals won’t be seeing more of him in the future, The Villager’s real estate source said. The real estate industry operates much differently than any other, he noted, and even after a colossal defeat, investors can rise from the ashes of a disaster like Toledano’s. ‘The beauty and horrors of real estate is that it’s more forgiving than Jesus,’ the insider said. ‘You can screw up or screw people any number of times and bankers will still throw money at you if they think they can make a buck.’”