May 12, 2017

A Salient Element Of The Greater Fool

It’s Friday desk clearing time for this blogger. “Luxury listings — those priced $600,000 and up — over the past two years are taking longer to sell. Miami’s glut of inventory and sluggish rebound are due to several factors. With the abundantly high inventory, Miami’s high-end condo buyers have the upper hand. With New York’s heavy international presence from the United Nations to world embassies and multinational companies, the slowdown in sales of New York luxury condos appears to be from overseas economic turmoil, the stronger U.S. dollar and the U.S. presidential election.”

“Realtor Maria Wall of Corcoran Group observes, ‘The high-end condo market, such as 432 Park, is not selling as well and as fast as the developers wish.’”

“A review of San Francisco luxury condo data from Paragon Real Estate Group shows a combined five-month supply of luxury condos, co-ops and tenant-in-common units for sale. Paragon Chief Market Analyst and Vice President of Business Development Patrick Carlisle explains: ‘The luxury condo market segment is now the weakest segment of the San Francisco market. If more new projects continue to come on line before existing inventory is sold and without a corresponding increase in demand, the market can only become softer.’”

“Miami-Dade County has the second-highest rate of repeat foreclosures of any major housing market, topped only by New York City, according to Attom Data Solutions. Miami-Dade’s rate was 32 percent, followed by Los Angeles County with 39 percent and Maricopa County (Phoenix), with 26 percent, according to Attom’s April 2017 report. New York’s rate was 54 percent. Attom defines a repeat foreclosure as a foreclosure start filed in 2016 on a property with an address and owner ‘s last name combination that also showed a previous foreclosure start with the same property address and owner combination in the last 10 years.”

“New Castle County Council approved a new $1,000 fine for persistently vacant homes and commercial buildings. The new fine is part of a larger effort to give county officials more power to see so-called ‘zombie homes’ reinhabited. County officials estimate there are at least 1,300 vacant homes within the unincorporated areas of New Castle County. Councilman David Tackett said many are owned by banks that stall the foreclosure process by booting residents but not completing the change in ownership. The new rules would apply a timeframe for a company that holds a mortgage to report that the property will become vacant if the mortgage is in default.”

“A surge in real estate listings in the Greater Toronto Area is helping to calm potential buyers as the anxiety shifts to sellers who now have to wonder if anyone will show up on offer night. Jimmy Molloy, an agent with Chestnut Park Real Estate Ltd., believes that the urge for caution from politicians combined with the jump in listings has led buyers to feel a little less pressured. ‘There’s almost a psychological warfare mounted by the government to get everyone to step back and be a little more thoughtful.’”

“He sees the typical spring mentality developing: house hunters who have been deprived of listings for so long feel immediate relief when they see more ‘for sale’ signs appearing on lawns. ‘Now there’s more supply, they don’t want to buy them either.’”

“Ten houses which were being offered for sale at a discount in North Berwick have been bought by East Lothian Council, at a cost of more than £1 million, after developers were unable to find private buyers. CALA Homes built 49 homes on the land with the agreement 12 would be affordable housing. But attempts to sell these homes at a discount saw only two of them snatched up so the council stepped in to take on the remaining 10, with ‘local people in need of good quality housing now benefiting.’”

“SNP group leader Stuart Currie questioned the use of public money for houses which he said did not support people on council house waiting lists. He said: ‘I was surprised to see the decision to use rent and tax payers’ cash to buy houses on the open market and then immediately sell them at a heavy discount buried inside the council website. This raises a number of concerns.’”

“Cracks are starting to appear in the Forest City façade. Many investors now say they have run into problems making payments on their Forest City apartments, and can’t get their deposits back. ‘I‘ve lost confidence in this project and I don’t want to pay any more,’ 39-year-old Kitty Zhu from the southern Chinese city of Zhuhai, who has paid nearly US$44,000 of the US$334,000 purchase price of a flat here, told the New York Times. ‘I told my salesman that I want a refund, but he just avoids me.’”

“Traveling through the city of Johor Bahru, also known as JB, where the project is located, yet another risk for potential investors became obviously clear – oversupply. At a shopping mall in JB, a young consultant for property firm Premier Plus approaches me with folders for a luxury project in the city, developed by a local firm. Without further ado, he offers nine years guaranteed return of more than 6% and shaves 30% off the list price. I ask if he’s worried about oversupply. ‘No, not at all,’ he initially says, but – after making sure no one else can hear us – alters his answer. ‘Actually, there are too many Chinese developers here. It’s not good for the market. It makes me very worried.’”

“Editor, RE: ‘Rwanda’s economy is in the right trajectory, but do landlords see it?’ There certainly is an oversupply of high-end residential properties and commercial space and a dearth of low-middle income housing. This is not accidental. The developers of the posh properties see (on paper) a higher return on investment on these rather than on low cost building. Lending institutions have a hand in this situation. Their risk management departments failed to do their homework and now they have un-serviced loans on their books.”

“Like all markets, there is a salient element of the greater fool. And yes, it’s a credit cycle all markets ride out, both short and long term credit cycles. So depending on which point in the credit cycle, peak or trough, gains and/or losses can be made by those of a more venal bent. Fortunately/unfortunately…this is the way of the world.”

“Danny Flynn denies none of it. The prominent South Shore auctioneer and real estate professional acknowledges swindling unwitting investors, including close friends and Boston College classmates, out of at least $9.5 million in real estate scams, although prosecutors say the true magnitude of his theft is more than $21 million. Prosector, Neil J. Gallagher Jr., said that while several people Flynn defrauded were in the courtroom, they decided not to speak because of their ‘utter embarrassment’ at having fallen for his scams and their unwillingness to be identified in the press.”

“‘These are people who are smart, educated, went to Boston College, knew Dan Flynn as a friend and colleague . . . and [want to protect their] reputations as someone who should have known better but were sucked into what he was doing,’ Gallagher said.”