September 30, 2017

Industry Pushback And Fear-Mongering

A weekend topic starting with CNBC. “In the midst of the mad selling and explaining and quantifying and qualifying of potentially the biggest U.S. tax overhaul in decades, President Donald Trump’s chief economic advisor stood at a White House podium and made a bold declaration: ‘People don’t buy homes because of the mortgage deduction.’”

“Richard Green, director and chair of University of Southern California’s Lusk Center for Real Estate, notes that the deduction is most important to those living in states like California, which has both high tax rates and high home prices. Home prices there, he said, could drop without the deduction.”

“The National Association of Realtors, one of the most powerful lobbying organizations in Washington, vehemently opposes any change to the deduction. In response to Cohn’s statement, NAR President William Brown said, ‘There’s a reason our nation has incentivized homeownership in the tax code for over a century. It works, and helps make homeownership more affordable for middle-class families who might not otherwise be able to close the deal, while setting them on track for a strong financial future.’”

The Mercury News in California. “California’s largest group of realty agents has warned that a Republican tax-reform proposal would erode the attractiveness of buying a house in the Golden State — but economists pointed out that these effects could also cause a dip in home prices that have skyrocketed. ‘There are several variables, but it would reduce home prices,’ said Fred Foldvary, a lecturer in economics at San Jose State University. ‘Right now, home prices are propped up by implicit subsidies, such as deductions for mortgage interest, property taxes, and other tax benefits. All of these puff up the value of residential real estate.’”

“‘It’s supply and demand,’ said Annette Nellen, a professor of accounting and taxation at San Jose State University. ‘If the demand for housing drops, the prices of homes could drop.’ The negative impacts from lost tax deductions, however, would primarily affect those in higher income-tax brackets, Nellen said.”

From Bloomberg. “Shanghai restaurateur David Hu said he’s nervous about wiring money to Australia for a home purchase because of China’s crackdown on currency outflows. Instead, he plans to carry the cash in a suitcase. The 61-year-old intended to move about A$85,000 ($66,000) to Melbourne this month, the last part of his financing for a deal struck last year. ‘Buying a property abroad was and is still workable,’ said Hu, though he described the process as a ‘lot more troublesome’ nowadays.”

“Some buyers are eschewing pricey hubs like New York for less-expensive areas such as Florida and Texas, according to Eric Lam, chief executive of Shiju, the overseas broker unit of Shenzhen World Union Properties Consultancy Inc. They’re typically spending up to 3 million yuan ($450,000) for U.S. homes, and as much as 2 million yuan for U.K. properties, prices that make for manageable down payments using exchange quotas, Lam said.”

“Developers continue to count on demand for prime luxury housing from the wealthiest Chinese buyers. On Monday, a crowd gathered in a Beijing hotel as the first 16 apartments from the towering 125 Greenwich Street project in lower Manhattan, were offered up at prices from $1.2 million to $12 million. ‘It’s about how determined home buyers are to get their money out, and whether their resolve is strong enough’ to risk punishments for breaking the rules,’ said Lam. He acknowledged that growth would have been stronger without the capital curbs.”

The Urban Developer in Australia. “This week we have seen another example of shortsightedness in the banking sector with ANZ bank tightening its restrictions on lending to apartment buyers in 18 suburbs in Brisbane and seven in Perth due to ‘growing fears’ of an oversupply in Australia’s capital cities. ANZ’s red-flag comes a little over a month after Citi clamped down on lending in 90 ‘blacklisted’ suburbs around Australia. The big-four bank issued a list of 25 suburbs in which loan to value ratios will be capped at 80 per cent of the apartment’s value.”

“From the outset, it is prudent to acknowledge that there are indeed pockets of oversupply in nearly all capital city markets in the country. Anyone with an ear to the ground would have realised this 12-24 months ago when the development boom was under way and every man and his dog was launching an apartment project. But this is the reality of a self-correction and, quite frankly, a move that will clear the decks and allow for the marketplace to sensibly recalibrate.”

“Whilst it will take some time to absorb the stock that has been developed, there are several factors that suggest we won’t experience ‘blood on the streets’, as some punters would suggest. So, What’s This all Mean? Well, it means that most of us are simply getting caught up in the media hype and failing to observe the underlying data. The very smart, local developers (think major player in South Brisbane!) are actually buying sites when others are running for the hills based on yesterday’s data. They’re looking beyond their nose, despite others trying to cut it off.”

From Macleans in Canada. “Canada’s real estate market has seen a lot of changes over the past year or so. Interest rates have gone up twice. Governments in B.C. and Ontario implemented foreign buyer taxes and other measures to cool housing markets, and the Greater Toronto Area is experiencing a dramatic slowdown in sales. More stringent mortgage stress-tests were introduced for borrowers last year, too, reducing demand.”

“Now yet another change is on the horizon that the real estate industry warns will hit the housing market hard, with spill-over effects to the broader economy. Industry pushback and fear-mongering is predictable when regulations are proposed, but in this case, the housing industry isn’t exactly wrong. A proposed policy change from the country’s banking regulator threatens to reduce home sales, knock some first-buyers out of the market and push others to buy less expensive homes. That is the whole point, in fact—and it may be just what Canada needs.”

“With a decision approaching, the housing industry has amped up warnings that the changes spell trouble for the housing market, first-time buyers and the economy at large. Tim Hudak, CEO of the Ontario Real Estate Association, said the plans amount to a ‘war on first-time homebuyers’ and that the cumulative impact of tightening measures ‘risks capsizing the housing market altogether.’”

“Far from mounting an attack on homebuyers, however, regulators are trying to prevent a disaster from befalling those same homebuyers and threatening the economy. In what will come as news to no one, Canadians are heavily indebted. The household debt-to-income ratio hit another record high of 167.8 per cent in the second quarter of the year.”

“The debt service ratio, a measure of disposable income put toward loan payments, is set to increase to 16.3 per cent by 2021, according to the Parliamentary Budget Office, a level Canada has never seen. The number of households with a home equity line of credit and a mortgage against their properties has increased nearly 40 per cent since 2011. Non-mortgage debt is rising, too, including installment loans—high-interest, short-term products.”

“Bank of Canada Governor Stephen Poloz has signalled the central bank is on a tightening path, albeit a very cautious and gradual one. Still, that marks a dramatic shift after years of excessively loose monetary policy. Previously, Canadians could renew their mortgages and obtain more favourable rates. Now the odds are they’ll have to pay more come renewal time. Those who opt for variable-rate mortgages can expect the same.”

From Metro News in Canada. “Don’t be distracted by claims from the real estate industry that adding more housing supply will solve Metro Vancouver’s broken housing system, housing experts told delegates to the annual Union of B.C. Municipalities conference. ‘The supply claims are mainly about distracting us from doing things on the demand side,’ Josh Gordon told the city councillors and local government staff gathered for a conference. ‘They do not want us to tackle demand: they want to be able to build endlessly for the world’s rich.’”

“Gordon, an assistant professor at Simon Fraser University’s School of Public Policy, presented along with David Ley, a professor emeritus in the University of British Columbia’s Department of Geography, and urban planner Andy Yan, director of SFU’s City Program. All three highlighted the staggering, and widening, disconnect between local incomes and house prices. Ley highlighted a measure of affordability developed by the Demographia survey: housing is considered severely unaffordable at a rate of 5.1, and Vancouver is currently rated at 11.8.”

“Vancouver is now attempting to ‘gently’ increase density in single family neighbourhoods, but has faced criticism for not allowing denser buildings like townhouses and low-rise apartment buildings in all single family zones. ‘With supply, we always need to put an adjective in front of the word supply: it’s affordable supply. You do not need more million dollar-plus condo or townhouse units, which is typically what’s been provided,’ Ley said. ‘New supply might decrease overall affordability, by driving up land prices through speculative land assembly when land zoning is anticipated — as we see happening along many of the thoroughfares.’”

September 29, 2017

It Seemed Like The Only Way Was Up

It’s Friday desk clearing time for this blogger. “While there’s no doubt that a lack of homes on the market means sellers continue to have the upper hand, there are signs of buyer fatigue and flattening prices in the District. ‘The housing market is slowing in nearly every metro area in the country,’ says Nela Richardson, chief economist of Redfin brokerage in Washington. Affordability is the culprit in the District and other locations, Richardson says. Sellers need to recognize that this is not the time to overprice their homes, despite the low inventory, says Donna Evers, broker/owner of Evers & Co. in Washington, which was recently sold to Long & Foster Real Estate.”

“‘Sellers who have been waiting for summer to end to put their homes on the market tend to overprice their homes in the fall,’ Evers says. ‘This is particularly a problem for homes valued at $1.5 million or above. There are lots of expensive properties on the market, so sellers need to compete in that price range.’”

“If you’ve been house shopping lately in Nashville or its surrounding cities, you know the perfect house only stays on the market for days, and in some cases, hours. Some realtors are now saying the market is cooling off and giving buyers a more level playing field. ‘I would say for the last two and a half to four years it’s been a hot sellers’ market. And now these last 30 to 45 days I’m personally starting to see a slowdown, and it’s kind of slowly shifting back to a neutral market,’ real estate agent Kim Cunliffe said.”

“Libby Dorris has watched her neighbors struggle to sell their homes for months. ‘One has been on the market since March and the other since July,’ Dorris said.”

“It’s been a busy year for the Killington real estate market, and while prices are moving up slightly for some properties, they still represent good values, real estate agents report. Kyle Kershner, broker and owner of Killington Pico Realty noted, ‘The number of sales for both condos and single-family homes in Killington are up year-to-date over the same time period in 2016, but paradoxically, the median sales price in both categories is down by nine and ten percent respectively. A possible explanation for this is that listing inventory in both categories has remained high — I’m carrying more listings today than I have at any other point in my 16-year career. … we have a 30-month supply of single-family home inventory on the market today and a 20-month supply of condominium inventory.’”

“These facts about the Kitchener-Waterloo real estate market are true: Homes are selling for, on average, less money than they were earlier this year. They’re spending much longer on the market. Bidding wars are far less common. April was when the local real estate frenzy was at its peak. The area’s average residential sale price hit an all-time high of $512,656. Since then, the average sale price has fallen for four straight months. For August, it stood at $441,992.”

“Most adversely affected by the changing conditions, says Keith Church, the broker of record with Royal LePage Grand Valley Realty, are people who think they can get the same price for their home now that their neighbour got for a similar property a few months earlier. ‘They’re not going to get that today,’ he says. ‘The market has sagged for the sellers.’”

“House prices in London have fallen annually for the first time in eight years, figures revealed today. The capital has seen a dramatic turnaround in just two years, from buyers queuing at open days outside homes for sale to reduced signs going up on property listings. ‘I’m in the process of buying two properties for clients in Loughton where not only am I the only buyer for each but we are paying 10 per cent less than the asking price. Prices in many places are falling back, sales are taking longer and pitching an asking price is hard,’ said property buying agent Henry Pryor. ‘My advice is that the price is just a part of the marketing to attract buyers to come and view. It’s not a statement of value nor is it what you are prepared to accept. There is a market for those who want to buy and sell, it’s just not the same market we had 18 months ago.’”

“There is little doubt that since the recent financial crisis ended, housing prices in Denmark have skyrocketed to a point when talk of ‘housing bubbles’ have once again came to the fore. But those discussions could very well dissipate soon. From Monday morning, tens of thousands of homeowners in the Copenhagen and Aarhus areas will wake up to a whole new housing market reality as the Business Ministry moves to avoid a repeat of the bubble burst of yesteryear.”

“Some experts, however, contend that the state’s effort to put a damper on the housing price spike is too stringent and could lead to a downward spiral. ‘The new rules will curb price development in the impacted municipalities, and that’s basically the purpose of them. But as regards the bigger picture, there are a lot of other initiatives aiming to tackle the price development – primarily through a tax reform,’ Mikkel Høegh, a real estate economist with BRF Kredit, told Politken. ‘So we are afraid we will see the opposite of a bubble: a downward trajectory that will completely deflate the housing market.’”

“For several years it seemed like the only way was up for Yangon’s property sector. But like any market, real estate goes through cycles of boom and bust that are normally based on supply and demand. In most regards Yangon’s property market is now in a period of oversupply. Prime office rents are less than half what they were only two years ago. Condo prices (both rental and sale) are coming down; all indications suggest rents will fall further. House and land sale prices in mid-to-outer suburbs are falling with plenty of stock on the market and few sales; rents here are also declining.”

“The biggest change in recent years, though, is choice: renters now have much of it, which was not always the case a few years ago. Supply has caught up to demand and there are now a variety of rental types across a range of prices. This trend is likely to continue – just look at the skyline and consider how many high-rise projects are sprouting up.”

“The ANZ has told its brokers to tighten lending restrictions in 11 postcodes in Brisbane and Perth, where buyers will now need a 20 per cent deposit before they can borrow. Banking and Finance Consumers Support Association president Denise Brailey warned the big four banks were scrapping some unpopular fees and cracking down on home loan applications as a last-minute attempt to win public support and stave off a Royal Commission.”

“Ms Brailey said she had more than 2,000 low income people on her books that had lost or faced losing their homes after being ‘preyed on by banks’ and granted loans they could not afford. ‘I have seen 70 and 80-year-olds on incomes of $30,000 a year given million dollar loans. It is just a disgrace,’ she said. ‘These are not isolated incidents, every case I’ve looked at has got fraud, some of them have got forgery, but they are all unaffordable, unstainable, unverified loans. In some cases, the elderly customers were paying the interest on their loans with the bank’s money.’”

“The 1,800 investors who handed over $120 million to a suspected Ponzi scheme masterminded by Pilbara businesswoman Veronica Macpherson are unlikely to get their money back, according to the liquidator of her Macro group companies. The biggest land asset is the Newman Estate, a 244-lot subdivision marketed by Macro as an upmarket development that would attract mine and service workers to live in the town and prompt a shift away from fly-in, fly-out workers.”

“Now corporate investigators like ASIC and liquidator Hayden White of KPMG are trying to unravel the vast and complex web of companies and international money flows left behind. Mr White recently reported to unsecured creditors and investors — who were mostly from overseas, predominantly from Singapore and Malaysia — that they were unlikely to see their money again.”

“The median price of land has dropped from $410,000 to $75,000 in the past year, according to the Real Estate Institute of WA. ‘They continue to incur costs, rates and taxes and they’re difficult to sell,’ Mr White said. ‘I’ve never had a situation where you can’t sell property. I always tend to have that view there’s always a buyer at some price. Unfortunately this matter is changing my view on that.’”

September 28, 2017

So The Boom Has Ended, Or It’s Ending Right Now?

A report from McKnight Senior Living. “An overabundance of unoccupied independent living, assisted living and memory care units means that billions of dollars in capital is not earning returns in the marketplace, Larry Rouvelas, principal of Senior Housing Analytics, and Kurt Read, principal of RSF Partners, told those attending the National Investment Center for Seniors Housing & Care Fall Conference in Chicago. Between independent living, assisted living and memory care, almost $20 billion in capital is not earning returns, they said. The growth of memory care communities has been an ‘impressive’ 44% over the past five years, going from 67,000 to 96,000 units, and more growth is coming, Rouvelas said.”

“But the number of vacant units increased during that time, too, from 8,000 to 18,000, he said., and 11,300 units are under construction. ‘If nothing else were built starting tomorrow … it would take over three years to fill up those units to 93% occupancy,’ Rouvelas said. ‘That’s about $3.6 billion of capital that’s getting a 0% return,’ Read pointed out. ‘That’s a sobering fact.’”

“The story is similar in assisted living and independent living, Rouvelas said. In assisted living, occupied units are up 13% in five years. It would take five years for the sector to hit 93% occupancy, however, Rouvelas said. ‘The number of empty units has grown, too,’ to 45,000, he said, and 20,000 units are under construction. ‘That’s over $9 billion of capital that’s not getting returns,’ Read said. In independent living, recent absorption has been 6,400 annually in the past two years, Rouvelas said. ‘There are 36,000 empty independent living units, with 17,000 more under construction,’ Rouvelas said. ‘And that would be about $7.2 billion in private capital in the industry,’ he said.”

The Daily Northwestern in Illinois. “The Park Evanston apartment building is being placed on the market in an effort to renovate the facilities, a move that could increase residents’ rents, said Ald. Donald Wilson (4th). The 24-story building, 1630 Chicago Ave., sits among many Evanston businesses and restaurants, including a Whole Foods. It also houses numerous Northwestern students who live off-campus.”

“Wilson said the increase in the number of proposals for mixed-use towers in Evanston is ‘reflective of the economic recovery in the county.’ However, NU’s new two-year live-in requirement coupled with an increase in the supply of rental units might weaken the market, Wilson said. ‘We have to be careful because we don’t want to put ourselves in the situation where you have a glut of properties,’ he said. ‘One wonders at what point the supply is going to overtake the market.’”

From LA Weekly in California. “The onetime magnet for the homeless has become, in the span of 10 years, a magnet for the young and wealthy, with median two-bedroom rents reaching $3,350 last year. Buoyed by South Park, the Old Bank District, and the Arts District, DTLA has become Venice East. But there’s been some grumbling that the dream downtown could be crumbling. Amid continued high rents regionwide, one of the hottest communities in the city for the young and prosperous has seen lease rates, in the assessment of Crystal Chen, marketing manager at rental listings site Zumper, flatten out.”

“Builders are responding with deals, including, in some cases, first-month-free leases and parking concessions, experts say. ‘The sheer amount of new apartments being built all at once and hitting the market all at once has caused a supply and demand issue,’ says CoStar senior market analyst Stephen Basham. Rents are being depressed as a result, he argues. ‘All of these buildings target wealthy renters, people making $80,000, $90,000 $100,000 a year and up,’ he says. ‘There’s only so many of those people out there.’”

“Indeed, Chen of Zumper says there has been a ‘lost of interest in the luxury housing market’ that’s also being seen in parts of San Francisco. It ‘leads to these expensive apartment buildings offering concessions like a month of free rent, cheaper security deposit, or a free parking spot,’ she says.”

“‘Developers, I think, are going to have to look at their pricing at some point,’ says downtown real estate agent Bill Cooper. ‘Every time you turn around a new building is opening and putting 500 to 1,000 new units on the market. We’re running out of people who can spend $4,000 a month on an 800-square-foot apartment. It’s not sustainable.’”

From San Francisco Curbed in California. “A long, hot summer has given way to a slightly cooler fall in San Francisco. Not in terms of weather but when it comes to the rental market. At least according to Zumper, which released its quarterly rent map displaying the median price of a single-bedroom apartment in San Francisco neighborhoods. A comparison to the same Zumper map from this time last year reveals that prices in each of the hot neighborhoods crept down from 2016. In fact, prices are down year over year in almost every neighborhood.”

From CBS Pittsburg in Pennsylvania. “For years now, cranes and construction crews have filled the skies of Pittsburgh as huge luxury apartment buildings have shot up in just about every city neighborhood. Places like Bakery Square in East Liberty, which have enticed scores of young professionals and tech workers to pay upwards of $1,500 a month on a single-bedroom apartment by providing services and amenities like a health club, a concierge and free Starbucks in the lobby.”

“Since 2012, more than 5,000 luxury apartment units have been built in the city. But after five years or torrid growth, the luxury apartment boom seems to have played out its string. ‘The supply has now outpaced the demand,’ said real estate expert Paul Griffith.”

“Experts like Griffith, of Integra Realty Resources, says there are now more units than new renters, and while some 1,300 more apartments are slated for construction next year, that should be the end of it. KDKA’s Andy Sheehan: ‘So the boom has ended, or it’s ending right now?’ Griffith: ‘I would agree with that. By the middle of next year, 2018, those units that are under construction will be complete and we’d expect to see a significant slow down at that point.’”

From KXAN in Texas. “A series of construction delays at an apartment complex is forcing hundreds of college students to jump from couch to couch or hotel to hotel. The residents were supposed to move into Pointe San Marcos apartments in August, but now they are being told they have to wait until the middle of October. Brianda Ramirez signed a lease with Pointe apartments earlier this year. The apartment is labeled as a luxury apartment building, with a resort-style pool and ‘the most over the top amenities.’”

“‘I’m living out of my car; I don’t know where most of my stuff is because it’s just been everywhere,’ Ramirez said. ‘I’m having to borrow things from people and having to ask if I can sleep at their apartment.’ KXAN did speak with Pointe apartments General Manager Mikkel Lopez who said he had no comment on the matter and referred us to corporate. We have yet to hear back from their corporate office.”

From Bloomberg on New York. “The asking price to rent a Manhattan apartment owned by Ivanka Trump has dropped by 30 percent since her father was elected president. The two-bedroom, two-bathroom condo at 502 Park Ave. was listed at $15,000 a month in November, according to StreetEasy. In February, it dropped to $13,000. The asking rent on Tuesday was $10,450, the website shows.”

“It seems that even the first daughter isn’t immune to pressures on Manhattan’s rental market, which is suffering from an oversupply. There were 7,497 apartments listed for rent in the borough at the end of August, 31 percent more than the monthly average going back to 2008, according to appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate.”

September 27, 2017

So Much Demand That Price Gains Have Been Coming Down

A report from “Maybe you’re addicted to those home-flipping shows on HGTV where glam couples buy grim shacks, spend 22 minutes smashing down walls and adding funky kitchen backsplashes, and then make tens of thousands selling the refurbished places on the open market. Or perhaps you’re jonesing for a steady stream of extra income and feel certain you’ve got what it takes to be a landlord. Or just maybe you’re on the prowl for a hands-off way to make serious real estate money with financial investments that don’t require laying down new flooring or screening prospective tenants.”

“Whichever option floats your boat, you’ve got plenty of company. After the epic boom-and-bust of the speculative home-flipping market in the aughts, everyone again seems to be looking to make a quick buck by becoming a real estate investor. But, of course, there’s no guarantee. And that’s why the thrill-a-minute world of real estate investing isn’t for everyone—especially when life savings are involved. ‘Real estate is very unpredictable,’ says certified financial planner Jenna Rogers of Mission Wealth in Santa Barbara, CA. ‘A lot of people feel like you can’t lose money in homes, but that’s not really the case. If there’s any kind of turmoil in the market, real estate usually gets hit really hard.’”

“OK, now that we’ve gotten that out of the way, let’s go shopping.”

From the National Association of Realtors. “Pending home sales sank in August for the fifth time in six months, and slower activity in the areas hit hard by Hurricanes Harvey and Irma will likely pull existing sales for the year below the pace set in 2016, according to the National Association of Realtors®. Lawrence Yun, NAR chief economist, says this summer’s terribly low supply levels have officially drained all of the housing market’s momentum over the past year. ‘August was another month of declining contract activity because of the one-two punch of limited listings and home prices rising far above incomes,’ he said. ‘Demand continues to overwhelm supply in most of the country, and as a result, many would-be buyers from earlier in the year are still in the market for a home, while others have perhaps decided to temporarily postpone their search.’”

“With little relief expected from the housing shortages that continue to plague several areas, Yun believes the housing market has essentially stalled.”

From CNBC. “There is so much demand for housing and so few homes for sale that prices have nowhere to go but up — unless of course they get so high that potential buyers have no choice but to back away. That may be what is happening now. After hitting a peak in March of this year, price gains month to month have been coming down. In Southern California, prices are still up considerably from a year ago but seem to have stalled, according to CoreLogic. In Washington, D.C., where prices have been hitting new peaks recently, the median home price in August fell more than 5 percent annually, according to the Greater Capital Area Association of Realtors.”

The Mercury News in California. “We asked CEO of the Sereno Group, Chris Trapani to make sense of the real estate market in the heart of Silicon Valley: the notoriously tight supply of available homes and the persistent demand that keeps driving prices up. How do buyers manage to keep outbidding one another in a county where the median price of a single-family home is $1.1 million. Q: What have you uncovered? What are your theories?”

“A: The obvious thing is that the NASDAQ has been over 6,000 for a while; that’s a lot of equity that people have that they’re able to translate into housing. That’s the no-brainer. Another appreciation driver is the increasing use of Restricted Stock Units — known as RSUs — in loan qualifying.”

“Q: Does this create any longer-term risk? Is it a risky loan practice for the market? A: I think there’s more risk than if I’m qualifying from a base salary alone …”

The Ahwatukee Foothill News in Arizona. “The distribution of millennial buyers is not equal across the East Valley. While Chandler and Gilbert are attracting millennials, Ahwatukee is not a primary market to those buyers because of a higher barrier to entry. The one market that is seeing a glut of inventory in Ahwatukee is luxury homes. While the market has improved in the past few months, there is still a lot of inventory sitting because there are fewer buyers interested in homes above $750,000, said Realty Executives’ Patrick Lewis.”

The Wicked Local Georgetown in Massachusetts. “This year, especially in eastern Massachusetts, has seen a spike in housing prices and competition of offers unlike anything in recent memory. Currently, Newburyport has 67 homes for sale, with a wide price range from $379,000 to $4.1 million. Some of those listings have been on the market for well over a year, said Lisa Sevajian, realtor with Bentley’s Real Estate Group, so first-time buyers may find luck in Newburyport.”

“‘You’re not moving to Newburyport for no reason,’ Savajian continued. ‘You’re coming here because you like the lifestyle. It’s not like we have tech, for example. There’s a very specific buyer. So we have a lot of inventory, and prices are definitely attractive to buyers, and there’s a lot of price reduction this time of year.’”

“In nearby Topsfield, which has just 21 homes for sale, it’s a different story. The lowest list price in Topsfield is $472,000, and the highest is $5 million. ‘It’s a really good time to be a luxury buyer, because there’s a ton of luxury houses on the market - 831 days on market, 103 days on market, 351 days on market - and the summer may be over in Newburyport as a whole, but the luxury buyer should be out in full force,’ Sevajian said. ‘I’m encouraging my people who are looking in the higher price points to get out and get serious now, because people are going to be more willing to negotiate as we’re heading into the winter than they are coming out of the winter.’”

“There’s hope for those looking in Newburyport, which Sevajian says is a ‘cold market.’ ‘What that basically means is the summer market is long over - There are good houses, there are good values, there are good bargains and there are a lot of price changes,’ Sevajian said. ‘And what happens this time of year is that the people who are serious about selling stay on the market, and the people who are only looking to sell because it was a hot market pretty much take their house off the market.’”

“Even closer to Boston, Medford is still in a hot market - a really hot market, up 10 percent over this time last year - but foreclosures in that city may offer buyers hope. ‘Houses there still go quickly, but there’s a lot of foreclosures in Medford - There are about 5 times the amount of foreclosures that there are on the national average. So you’re going to have some distressed sales and some short sales that give buyers an opportunity to get into a hot market like that,’ Sevajian said.”

From Mansion Global on New York. “Last week was the worst week of the year for Manhattan’s luxury real estate market, according to the latest Olshan Realty report. The results were not simply lower than anticipated, but both the number of contracts signed and the total volume were the lowest of the year. Just 11 contracts were signed at $4 million or over—Olshan’s definition of luxury —for a total dollar volume of $61,047,990.”

“For a moment, it had appeared that the dreaded summer slump was over. During the week ending Sept. 17, and for the first time in 11 weeks, more than 20 luxury contracts were signed, signaling the market was on the up, but the surge didn’t last. The second most expensive was a three-bedroom condo at Tribeca’s ‘Jenga’ building, 56 Leonard. It was asking $6.975 million, reduced from $7.45 million when it went on the market in August 2016. Of the 11 contracts signed eight were condos, two were co-ops and one townhouse sold; no luxury condops sold last week.”

September 26, 2017

A Huge Wave Of New Supply Could Do Some Real Damage

A report from Mortgage News Daily. “New home sales were down again in August, following a 9.4 percent plunge in July. The U.S. Census Bureau and the Department of Housing and Urban Development said sales of newly constructed homes sold during the month at a seasonally adjusted rate of 560,000 units. This is a 3.4 percent drop from the revised rate of 580,000 (from 571,000) in July and is 1.2 percent lower than the August 2016 rate of 567,000. At the end of the reporting period there were an estimated 284,000 new homes available for sale, a 6.1-month supply.”

From National Real Estate Investor. “Nothing good lasts forever. Apartment sector experts are scanning the horizon for problems that could hurt their properties. Here are a few of the top worries for today’s multifamily investors: Luxury apartment building owners worry about competition from new class-A developments. ‘The delivery volume is the biggest concern in the class-A property niche now,’ says Greg Willett, chief economist for RealPage Inc., a provider of software and analytics to the real estate industry. Developers plan to open more than 100,000 new apartments per quarter starting in the third quarter and continuing through the middle of 2018. That’s up from the roughly 80,000 new units per quarter that opened over the last year.”

“‘A huge wave of new supply brought on-stream during the seasonally slow leasing period that is seen in the fourth quarter and the first quarter of 2018 could do some real damage to overall occupancy,’ says Willett.”

The Kansas City Star. “‘In reality there are only two flavors that new apartments come in,’ said Jim Thomas, a partner in Indianapolis-based Cityscape Residential, which is building hundreds of luxury units around the metro. ‘Luxury and low-income.’ Both types of housing are apt to garner government support. So far there appears to be no shortage of demand for the new luxury apartments shaping KC’s downtown skyline. But as more units go up, developer Thomas predicted, the supply of housing eventually will cause the market to soften and rents to stabilize.”

The Columbian in Washington. “Drive along state Highway 503 between Brush Prairie and Battle Ground and the land tells a story of more apartments to come. Signs staked out in pastures advertise commercial land. Though building of single-family homes continues at a rapid pace, right now it’s the construction of apartments and other multifamily dwellings that is red hot. For the first time in many years, more multifamily units are under construction in the city of Vancouver than single-family homes. In unincorporated Clark County, the share of multifamily housing is 42 percent, more than double 2016.”

“Roni Battan, a manager with the assessor’s office, said the homebuilding trend today resembles the 1970s and 1990s. ‘Since 2011 and moving forward, I’ve seen a huge increase in multifamily development,’ she said. ‘I mean, they can’t break ground fast enough to get these developments going.’”

“Still, the business cycle suggests that Clark County eventually will reach critical mass with multifamily housing. With plenty of apartments in the pipeline, it could happen within a couple of years, said Jon Spikkeland, senior associate of consulting firm Johnson Economics. Developers see what’s happening and they will start to pull back. When that happens, landlords will start sweetening the pot. Some will offer the first month of rent free or other promotions and amenities. Union Park developers built in a fitness center, playground, basketball court, a barbecue and patio with covered gazebo to try to separate it from the pack. It also touts amenities like keyless entry, parking for electric vehicles with charging stations and more.”

“Those amenities, developer Sam Scheuble said, make them more competitive for whatever turmoil the future may bring. ‘If we can be better than others, we’ll survive it,’ he said.”

The Seattle Times in Washington. “Seattle rents are rising at their slowest pace in more than five years and the slowdown is likely to continue as a record number of new apartments open, a new survey shows. Some hot neighborhoods have cooled way down. In Ballard, rents are up just 2 percent over the past year — the smallest increase in at least a decade. Capitol Hill’s average rents are up just $35 from a year ago, about the same as inflation. And Rainier Valley rents dropped a bit since the spring.”

“The report lays out how the market, which has long favored landlords, is finally starting to shift toward giving more power to renters. Seattle has opened more new apartments in the past five years than in the previous 25 years combined. But until recently that surge hadn’t affected rents, as all the expensive new buildings were quickly snatched up by the many people moving to the region. That story is changing. The number of new renters has begun to drop considerably, and the number of new apartments continues to grow, with another record-setting year for construction set for 2018.”

“‘Investors should plan for higher vacancies and fewer rent increases,’ Dupre + Scott wrote in its report.”

From KATU in Oregon. “After seven years of strong economic growth, real estate experts say Portlanders may soon notice prices are dropping. Mixed-use buildings have sprung up all over Portland, primarily on the city’s east side. Real estate broker Vinny Small says the increased supply has led to an increase in vacancy rates for both retail and residential units.”

“‘When I do throw a two-bedroom apartment out there, I’m not getting the response that I used to,’ Small said. ‘I’m actually having to do incentives, where you’ll give a free month of rent or lower the price, which wasn’t the case last year.’”

From Banker and Tradesman in Massachusetts. “Plans to build two residential towers above the Massachusetts Turnpike in Back Bay have been scaled back with elimination of a 182-unit apartment tower and reduction in a proposed condo tower from 160 to 108 units. In January 2017, Boston-based Weiner Ventures filed plans to build 182 apartments and 160 condos in a pair of towers rising 586 and 301 feet on a 1-acre site above the Turnpike and MBTA rail lines just west of the Hynes Convention Center.”

“The revised plans filed Monday with the Boston Planning and Development Agency are the latest in a series of pullbacks by multifamily developers in Boston after several years of blistering construction. Equity Residential said it’s delayed groundbreaking of its 44-story apartment tower at the Garden Garage site in the West End, citing rising construction costs. Boston-based Samuels & Assoc. last month dropped plans for 550 apartments at the Landmark Center in the Fenway in favor of a proposed 506,000-square-foot office and lab building called 401 Park.”

“And Boston-based HYM Investment Group said in July it will eliminate 118 apartments in favor of 55 condos at its 45-story Bulfinch Crossing tower under construction at the Government Center garage property.”

September 25, 2017

See Who’s Swimming Naked

A report from My Kawartha in Canada. “Prospective homebuyers are looking at reduced costs, longer listings and less bidding wars. At least for now. Following Peterborough’s hot spring market which drove costs up, realtors are saying prices have gone from a boil to a simmer. Leona Lambert owns a farm in Cavan Monaghan Township and has been trying to find a nearby property for her daughter to run her own farm. She says one nearby property’s price recently dropped from $799,000 to $699,000 and its still overpriced. Lambert says she’s seen old rundown homes with small lots sell for high prices. One property she looked at ‘only had two acres and they’re asking almost $700,000 for it.’”

“She says one problem is real estate agents marketing properties near Peterborough as having the potential to be developable lands, driving up the prices. The result is buyers being scared away, says Lambert. ‘Everybody thinks their place is worth so much money so they’re putting it up for $200,000 more than it’s worth,’ she adds.”

The Richmond News in Canada. “A Hong Kong woman is suing her her ex-boyfriend, demanding he be removed from the title of a single-family home she claims to have bought under his name to avoid paying a 15 per cent tax on residential properties for non-residents. According to a notice of civil claim filed in B.C. Supreme Court on Monday, Jennie Ka Yu Wu is asking to have Richmond resident Johnny Pak Shing Chu removed from title of the property, a new single-family home at 7488 Langton Road.”

“BC Assessment shows the last sale date for the property was Jan. 11 for $2,349,000. It is a new home built on the site of an old duplex. The property was valued at $2,248,000 as of July 1. So, roughly $350,000 in taxes, targeted for social housing for poor people, was avoided by transferring title to the Richmond resident. Asked if he has seen or heard of more of such cases, Surrey-based real estate lawyer Jon Singh said he couldn’t say anything for certain but his guess would be there are or will be more. ‘As Warren Buffet says, when the tide goes out you see who’s swimming naked.’”

The Western Investor in Canada. ” A year after the introduction of Canada’s first foreign-home buyer tax drove Metro Vancouver sales down 44 per cent, the three most popular markets for foreign buyers have yet to recover. West Vancouver, Richmond and the Westside of Vancouver – all areas with the highest proportion of foreign buyers prior to the implementation of the 15 per cent tax on August 2, 2016 – are all seeing lower sales now than in 2016.”

“Only 52 detached houses sold in West Vancouver this August, down from 72 in August of last year and benchmark house prices have fallen by 6.3 per cent, the biggest drop in the Metro region. Realtors say the price plunge is more dramatic at the high end of the market. ‘There, we have seen price reductions of 20 per cent to 30 per cent,’ said Brent Eilers of Remax Masters Realty in West Vancouver. According to Eilers, foreign buyers today immediately discount any asking price by 15 per cent to compensate for the tax ‘and then begin negotiations downward.’”

“He points to a view-property house on Russett Way in West Vancouver that was listed last year at $4.6 million. After four price reductions, it recently sold for $2.8 million. ‘The market is extremely sluggish,’ Eilers said. ‘It is a hell of a lot better time to buy now than last year,’ he said, but he suspect that prices for higher-end houses will continue to decline. ‘Eventually, sellers have to adjust their price.’”

From Bloomberg on Australia. “On a wet, midweek evening when most Australians are home cooking dinner, fewer than a third of the lights are on in the apartments in Melbourne’s Docklands. These ‘ghost towers,’ as the high-end residential property with three-bedroom apartments costing almost $1 million have been dubbed, are popular with Chinese investors who mostly live abroad. Their darkened blocks loom as sparsely occupied symbols of a property market where even solidly middle class households have increasingly found themselves priced out.”

“Now, policy makers are seizing on public resentment and hitting foreign buyers with more taxes. New South Wales has doubled its surcharge when foreigners purchase residential property, and Western Australia has added a new tax as well. More controversially, both the conservative federal government and the left-leaning one in Victoria state that includes Melbourne this year imposed additional taxes on properties deemed to be empty for six months or more.”

“Australia’s moves are part of a growing global trend, primarily in response to the massive amounts of capital that have poured out of China and into real estate around the world. Additional taxes targeting vacant homes are already in place in Vancouver and some London boroughs, with Toronto and Dublin mulling similar moves. Liu Yumei, a 52-year-old restaurant owner in Suzhou, China, is rethinking her plans. Her A$290,000 two-bedroom Melbourne apartment has been empty since 2013, other than for a brief family holiday. Citing the risk of it getting ‘messy and old,’ Liu said fears about damage stopped her from renting out the apartment, which was bought in anticipation of her son eventually living there during his university years.”

“The new vacancy tax for her unit would exceed $2,200 a year — enough to cause her to look into renters or AirBnB. ‘Some friends are educating me that rental income could be high in Australia and I shouldn’t miss it,’ said Liu, who has friends in Melbourne to help with arranging AirBnB stays.”

From The Australian. “Apartments bought off the plan at the start of Brisbane’s unprecedented unit-construction wave are selling at losses of up to 36 per cent, underscoring concerns from the Reserve Bank about the city’s concentrated inner-city market. Property searches of high-rise apartment towers in Hamilton, Bowen Hills and Fortitude Valley built about five years ago show most sales this year had been at a loss.”

“The heaviest falls were a $152,000 plunge from an original price of $522,000 for a Hamilton two-bedroom unit with river views; a $150,000 decline on a smaller two-bedroom unit in the same complex; and a $145,000 loss on a $400,000, 60sq m unit in Bowen Hills. RBA assistant governor Luci Ellis last week said it was ‘crunch time’ for Brisbane’s potential oversupply but warned the older apartment market was particularly vulnerable to price falls.”

“Andrew Coronis, managing director of Coronis real estate agencies across southeast Queensland, said price drops of 20 per cent to 25 per cent were not uncommon for resales after off-the-plan buys. ‘It is just time to sit and ride it out if you can,’ he said. ‘If rents drop a bit the yields still aren’t too bad. If you do have to sell, it’s better to do it now. I don’t believe it will get better in the short term.’”

From Domain News in Australia. “Dark days lie ahead for Australian luxury car retailers as sales screech to their biggest annual decline in more than five years. But those numbers could also hold a hint or two about the state of the housing market. Experts worry a slump in luxury car sales is a canary yellow Porsche in the coalmine for the health of the Australian economy and, in particular, house prices.”

“Just last year analysts noted record high luxury car sales as proof of the robust performance of the Australian economy – that indicator appears to have well and truly reversed course as Australia’s Rich Listers move to tighten their belts amid growing uncertainty. ‘In the past, when the top end of the new vehicle market has peaked it has signalled slowdowns,’ CommSec chief economist Craig James told Domain, referring to luxury car sales as a ‘confirming indicator’ of house prices.”

“Looking beyond the toys of bosses and successful entrepreneurs, recent Westpac data shows Australians are feeling downbeat, with the Consumer Sentiment Index notching up its 10th consecutive negative week in September. Specifically, only 10.5 per cent of respondents nominated real estate as the ‘wisest’ place for savings – the lowest number in 40 years.”

“Westpac senior economist Matt Hassan seconded Mr James’ comments, saying an air of caution is seeing Australians leaving their wallets in their pocket. ‘Vehicles are the bellwether of discretionary spending,’ Mr Hassan said. ‘When consumers become more concerned about job losses they put off purchasing vehicles.’ Simply put – if people no longer feel their double-digit annual house price gains are a sure bet, then they’re disinclined to spend big on a Lexus.”

September 24, 2017

The Red-Alerts Of A Distressed Market

A report from Barron’s on Florida. “To grasp the buying opportunities emerging in Miami’s condo market, it pays to study the prices obtained this year for two remarkably similar apartments next door to each other on the main drag of Brickell, the residential high-rise district in downtown Miami where the sky is filled with cranes and half-constructed buildings. First up is 1060 Brickell Ave., a fashionable building erected in 2008. Apartment #1815, a 945-square-foot one-bedroom, sold in mid-March for $285,000, or $302 per square foot. Right next door stands 1080 Brickell Ave., an elegant building erected just last year. Apartment #2508, a two-bedroom, 1,217-sq.-ft. apartment, sold for $620,000, or $509 per square foot.”

“That’s 69% more per square foot than the slightly older apartment next door that sold just a few weeks earlier. And here’s the thing: Even at that higher price, the condo flipper, who bought the just-built apartment seven months earlier, had to take a $160,100 bath (net of 6% commission) to quickly rid himself of the place.”

“Why the speculator at 1080 Brickell would take such a big hit to get out—and why the resell price of the older apartment at 1060 seems so low—becomes apparent when you look at the chart below, provided by StatFunding, which outlines the rising overhang of condos hitting the Miami market. Peter Zalewski, founder of counts 47,692 new condos in projects east of Interstate 95 in the three South Florida counties of Miami-Dade, Broward, and Palm Beach. The majority of those units are in Miami-Dade County, with the latest wave of projects built mostly around Fort Lauderdale.”

“Of those, 22% have been built and delivered since 2011, with another 24% currently under construction. The remaining units are in early planning phases or actively seeking planning permission. That means the South Florida market is growing by ‘at least 22,000 units—even if they turn off the spigot today—based on what’s been delivered or what’s under construction,’ he says.”

“Let’s put those 22,000 new units in perspective. Zalewski figures 71% of the new supply is in Miami-Dade County. According to Miami Realtors, 1,323 condos and townhouses in Miami-Dade sold in June 2017. That isn’t much of a dent in the inventory of 15,067 condos, almost entirely made of older stock, that are currently for sale. There is already some 14 months of supply in the Miami market, a 20.4% increase in just one year. To that supply, you have to add the wave of new construction coming on-line.”

“No surprise that the red-alerts of a distressed market can be seen everywhere. ‘We’re in the beginning of the downfall. No one wants to catch a falling knife’ Zalewski warns. He notes savvy developers are ‘building with one foot on the brake,’ trying to time when their projects come to market.”

From the Los Angeles Times. “Question: I’ve been the treasurer of our 30-unit self-managed condominium association for more than 20 years and until recently the handling of buyer and refinance escrows and other paperwork for property transactions was a breeze. This year, though, mortgage lenders started asking for a fidelity bond for coverage of the association’s working cash balance — something totally unrelated to the transaction’s escrow account — with losses payable to the lender.”

“We are finding that in order for a person’s loan or refinance application to be completed to a lender’s satisfaction, the lenders are imposing additional requirements that boards must be answerable for. Even beyond the fidelity bond, lenders are sending us complicated forms with many questions about the financial health of our association. And they want the signatures of two board members certifying the truth of the answers. All this is making board directors skittish and apprehensive about completing the paperwork.”

“Answer: It appears lenders are getting more skittish about issuing mortgages to buyers of condominium units as the real estate market recovers from the housing bust, a time when lenders experienced a spate of foreclosures. Now, with prices once again reaching record levels, banks and other mortgage lenders look to be taking steps to protect themselves.”

From Xinhua Net on California. “With unique geographical advantages and natural conditions, U.S. western coast state of California always attracts a great mount of people for investing, sightseeing and residing. However, its stubbornly high housing price also deterred many people who attempt to move in, and many are even considering about leaving the Golden State due to the skyrocketed housing cost.”

“‘We have been renting an apartment for over 10 years, and still cannot buy our own house, as the renting price increases every year. The American dream is about a house and a green card. But here in California it’s not easy to let your American dream come true. Therefore, we decided to move to Texas, it happened to have a good job opportunity for me,’ Yunqi Li, a local resident of Los Angeles, told Xinhua.”

“A research result, released this week by University of California Berkeley’s Institute of Governmental Studies, showed that 56 percent of California residents are considering moving, both the renters and homeowners. For Los Angeles area, 59 percent people are mulling this matter. The housing affordability crisis, happened in every large city of California, like San Francisco, San Jose, Los Angeles, San Diego and Sacramento, resulted in more and more homeless people living at public area.”

“According to a report released by University of California Los Angeles (UCLA) earlier this year, the poverty rate in the whole Los Angeles area had increased from 15 percent to 17 percent between the year of 2011 and 2015. The main reasons causing the poverty are unemployment and unaffordable housing price.”

“There are still many people who think the housing price in Los Angeles is acceptable. Susan Park and her husband moved from the Bay Area of San Francisco to Los Angeles two years ago, and said the housing is affardable here in LA. ‘The house in the Bay Area were very expensive, we could not afford it. We rent a one-bedroom apartment was about 3,000 U.S dollars. Compare with Bay Area, I think the housing price in Los Angeles is affordable and reasonable,’ Susan said to Xinhua.”

“‘The real estate of California is like this. I think it’s hard to lower down the housing price. If some people move out, others would move in, since we have more job opportunities and competitive economy here. The housing price would not easily go down in a short time from my anticipation,’ Jason Gu, a real estate agent of Southern California, told Xinhua.”

From Reuters on Texas. “Addressing a real estate conference in flood-ravaged Houston this month, longtime investor Ray Sasser detailed his strategy: buy up to 50 flooded homes at deep discounts, then fix and flip them for a hefty profit. Sasser first followed that game plan after Tropical Storm Allison flooded the city in 2001. He bought homes for 30 to 40 percent of their pre-storm value, spent another 15 percent on repairs, and sold many a year later - at full value.”

“The quick recovery surprised him, he said. ‘This can’t be true,’ he recalled thinking at the time.”

“Tara Waggoner, the Houston market manager for brokerage and online listings firm Redfin, said the firm’s local agents were getting about four times the number of calls they usually get from investors. ‘You have people with millions of dollars to work with,’ she said. ‘They want to go in, pay cash, get the discount and fix it up to sell.’”

“At the Realty Investment Club of Houston - or RICH, for short, Linda Muscarello - who calls herself the Queen of Foreclosure - spoke of the ’subtle psychology’ of negotiating with struggling homeowners. Waving a bedazzled scepter at her audience, Muscarello advised investors to listen and nod when talking to owners of distressed properties, who can often have unrealistic notions of their ability to afford continued mortgage payments. Many homeowners hit by Harvey did not have flood insurance and may not have the money to rebuild.”

“Muscarello advised investors to talk to homeowners as if there is a chance they can avoid selling – even if the investor’s interest is buying them out. When discussing finances with homeowners unable to afford payments, Muscarello advised asking, ‘How short are you?’ ‘It’s very important you say it that way,’ she explained. ‘It’s as if you’re still considering helping them to keep their house.’”

“While approaching a distressed homeowner can feel predatory if poorly handled, selling can help homeowners in some situations, especially if the home’s damage is coupled with job loss or damage to a business. The big question for homeowners is whether they expect to have steady, long-term income that will let them ride out repairs that may or may not be covered by insurance. If not, said economist and University of Houston professor Bill Gilmer, ‘you might just want to give the keys to someone else.’”

September 23, 2017

An Era When Some Were Making Small Fortunes

A weekend topic starting with Vulture. “HGTV was the third-most-popular network on cable television in 2016, a 24/7 testament to the powers of Target chic, the open-plan kitchen, and social conservatism. It unspools with the same bland cheerfulness as Leave It to Beaver, and its heart is in the same place. Many viewers — in red states and blue cities, in rent-controlled studio apartments and 6,000-square-foot McMansions — confess it’s a bedtime ritual, prelude to a night spent dreaming of ceramic-tile backsplashes and double-sink vanities.”

“Over the past two years, it has become such a ratings and advertising sensation that it is largely responsible for the recent sale, this summer, of its parent company, Scripps Networks Interactive, to Discovery Communications for $11.9 billion.”

“We are supposed to be in rehab from our housing binge of ten years ago, the one that nearly bankrupted the country. We are supposed to be in a state of contrition. But our national love of HGTV suggests that the dream won’t die. The longing it addresses is impervious to market corrections, or personal financial realities, and as economists continue to explore the true causes of the 2008 financial crisis, they are beginning to suspect that some speculative Americans acting on that longing got us into that mess as much as — or more than — unscrupulous bankers or Wall Street. In fact, the network may now be tempting its millions of fans to dip their toes back into the most dangerous waters of the past crisis: flipping.”

“It was in 1999 that the network found its audience with a new show called House Hunters, of which there are now an astounding 1,772 episodes. The early episodes are very different from what the show has become; they were full of the pitfalls of buying a house for the first time. Today, House Hunters, like all HGTV shows, follows a formula as inflexible as the Latin Mass. But just as the mild stimulant of Decorating Cents made way for the Adderall of House Hunters, so did the latter prepare viewer and network for the speedball of flipping, which is now the core of the network’s most successful shows and which may be the most dangerous part of a national obsession that has caused us all great grief in the past and possibly even spurred that global financial crisis. It all began with Property Brothers.”

“The Property Brothers don’t flip houses; they remodel for individual clients. But viewers found that they loved watching the process of a butt-ugly house getting transformed into an open-plan showplace. Soon, a new HGTV genre was born: shows about married couples (he’s a contractor, she’s a designer) who buy and flip houses together. Once the network started putting a married couple with star power on a show — and featuring not just the houses they were flipping but also their own homes and their children and happy moments from their daily lives — it jump-started the ratings streak that has made it so successful.”

“We really shouldn’t be watching this much HGTV during our rehab. Although it’s a soothing experience, it is also a fomenter of deep feelings of discontent about one’s living arrangements. The discontent gnaws as the addiction to the programming grows, and you have to imagine many viewers find themselves enticed to do foolish things like take out second mortgages so that they can blast out a few walls and get a little of what Chip and Joanna seem to have. More troublingly, we also have to wonder how many may be inspired to think that they, too, have what it takes to flip houses.”

“A recent, worrisome working paper released by the National Bureau of Economic Research reported on the tinder of the last conflagration: the national sense that housing prices were going up every day and that there was no way that a buyer’s reach could exceed his grasp. It’s true that bankers made loans to Americans wildly unqualified for them — but the notion that buyers on the lower end of credit distribution began to default in unprecedented numbers isn’t accurate. In fact, the rate of default in the subprime market throughout the bubble and the bust remained steady compared with before the crisis.”

“It was buyers from the top and middle top who account for the skyrocketing rate of default — and it wasn’t that they were buying bigger family homes that they couldn’t afford. It was that they were buying additional houses to flip for a profit, and when holding on to them stopped making financial sense, and with no personal and emotional connection to them, they began walking away in huge numbers.”

“And yet … the flippers on HGTV make it look so simple, so fun. At the end of each episode, they run the numbers and show how much the happy couples have pocketed. What could the network be quietly motivating its viewers to do? With our real-estate-loving president — who has Property Brothers programmed into the TiVo on Air Force One and who is eager to do away with regulations, which are one of the forces supposed to protect us from another bust — we could be in the early stages of another crisis. Our collective fate could be largely in the hands of … Christina and Tarek El Moussa and however many people they inspire to pick up a house at a foreclosure sale.”

From Vice Magazine. “At the age of 24, making $35,000 a year working as an editorial aide at a newspaper, I bought some real estate: a 770-square-foot, one-bedroom condo in Northern Virginia. This was 2006, with the housing bubble at its most distended, basically the worst possible time to be buying a piece of real estate, and in the DC area, where inflated prices are the norm in any market condition. I avoided a subprime loan because I had the backing of my middle-class parents, but this was still a terrible, terrible decision.”

“Eleven years later I’m stuck in debt, besieged by bank fees, and unable to get myself out of what has become a life-altering real estate clusterfuck. Even as the country recovers from the crash of 2008, the financial crisis is still dragging me down.”

“Looking back, it’s easy for strangers to armchair quarterback my path to financial ruin. I obviously wasn’t making enough on my own to afford the place, and my career choice, print journalism, has never been known for its robust earning potential. And this was at a time when newspaper jobs were decreasing and digital media jobs were still few in number.”

“Nevertheless, my parents pressed me on the idea of home ownership. I told them I had heard there might be a housing bubble. They brushed it off. I worried what would happen if I suddenly had to move to another city for work, a very real possibility for someone starting out in newspapers. They told me if I didn’t buy then, there was a good chance I’d never be a homeowner. I’m not sure that warning would bother me now, but evidently it spooked me then. Bottom line, I was a 24-year-old being gifted with what seemed like a great opportunity. My parents were going to help me buy a home. Why say no to that?”

“I figured if my parents, who both had government jobs dealing in finance and had worked in banking before that, were confident, it would work out. This was also an era when some people were making small fortunes flipping houses. I figured I could live in this place for a few years, move if I had to, and maybe come away with a little extra money.”

“I was wrong: Today I’m still living in the condo, but just barely hanging on. I can’t sell the place. Mine is one of about 5.5 million, or nearly 10 percent of all US mortgages, that currently underwater, meaning I owe more than the property is worth.”

“I’m struggling to stay afloat and taking on a punishing work schedule in a desperate attempt to stick it out and avoid foreclosure. The equity I’ve built is closing in on the point where it might cover the value the property lost in the crash. That’s being optimistic. Even after more than a decade forking over interest on a mortgage, the idea of simply breaking even—getting away from this condo with nothing to show for it—sounds like a dream. But I’m worried I won’t make it to that point, much less ever get close to owning the place outright.”

“I would be fine with foreclosure, even though that would wreck my credit, simply to move on and extricate myself from this mess—but because my parents are also tied up in the purchase, bankruptcy or foreclosure would harm them, as well. So with no ability to relocate for better work or lower monthly bills, I press on, at least for now.”

“Earlier this year, one of the endless array of reductive takes about millennials made the rounds online, this one regarding my generation’s tendency to eschew home ownership. The reasoning, put forth by some Australian millionaire I’d never heard of and hopefully never will again, was that millennials spend too much on frivolous things like avocado toast and fancy coffee instead of saving toward a down payment on a home. In no time at all people pointed out the flaws in this argument: Experts say millennials are actually more frugal than Boomers in their spending habits. It also doesn’t help that since the crash home builders have concentrated on high-end properties, and not the sort of starter homes young first-timers could afford.”

“But my experience suggests another reason millennials don’t buy homes. Maybe they just know what they’re doing.”

September 22, 2017

The Period Of Joyous, Abundant Business Is Over

It’s Friday desk clearing time for this blogger. “That chill in the air? It’s called fall…as in falling number of houses sold. ‘With pricing on the rise you might think that’s a little bit of a concern but we’ve got int rates that are unheard of and it’s been that way for some time so we’ve actually seen a little bit of a drop in interest rates so for buyers now is the time for them to be thinking of making a purchase because we’re in a little bit of a lull,’ said Kath Hammerseng, the incoming President of the Minneapolis Area Association of Realtors.”

“Okay…so it’s a buyers market. ‘On the other hand sellers are in a great place. Overall our marketplace has 2.5 months of inventory right now so it should be very much in favor of sellers and in some areas in some segments of the market it is that,’ Hammerseng said. Nevermind…still a seller’s market, right? ‘It is a little bit confusing. There’s a lot of data here. We’ve got some areas where people are receiving multiple offers for their property in certain price points we also have some areas where it’s very difficult,’ Hammerseng said.”

“It took eight years and a nearly $13.5 million in price cuts to sell an the home at 81 Briar Patch Road in East Hampton. The 12,000-square-foot, seven-bed, nine-bath home was listed in 2009 for $39.5 million, and the sale closed this year for $25.925 million. The 10,500-square-foot home at 356 Wickapogue Road in Southampton got a nearly 18 percent price cut this week after sitting on the market for two years. Originally listed at $19.5 million, the three-acre property is now for sale at $16 million.”

“Some luxurious apartment buildings in the part of Los Angeles known to locals as ‘DTLA’ might feel more ghost town than downtown right now. Renters simply aren’t shelling out (or can’t afford) to live in DTLA’s slew of new luxury high rises. All things considered, CoStar Group’s Steve Basham says investments in DTLA will be profitable if developers are willing to stick with it; don’t count on any quick rewards right now, but expect a good return in 10 to 20 years, he said.”

“A Toronto-area family who decided to walk away from a new house they agreed to buy says they are shocked to find out they still have to pay real estate commissions, even though the deal never went through. Marcello and Anita Mastroianni decided this past spring to sell their semi-detached home in Vaughan, Ont., north of Toronto to buy a larger house for their growing family. They say their agent told them their house would fetch at least $1 million once they listed it, so they made an offer to purchase another home nearby for $1.3 million.”

“But within weeks of signing the paperwork, the real estate market in the Greater Toronto Area began to cool sharply and both homes dropped in value. The Mastroiannis decided to walk away and not close the home purchase. They knew they would lose their deposit, but they didn’t realize they would be on the hook for so much more. They received a notice from their real estate agent, Vince Tarasca, which stated he was going to pursue them for the commissions that he lost.”

“He said of the Mastroiannis: ‘…they refused to close, stringing sellers, agents, mortgage brokers and lawyers along the way… This is a case of a client taking advantage of the current situation of the housing market due to buyer’s remorse.’”

“Turkish Deputy Prime Minister Ali Babacan sounded the alarm in 2014: Industrial investment was in decline while a construction boom was luring entrepreneurs to build shopping malls and luxury housing projects with the promise of quick profits. He stressed the need to encourage investment in industry, warning, ‘Or else we are becoming an economy that builds very luxurious buildings, spending its money on stone and concrete, without producing.’”

“Tekin Acar, head of a leading cosmetics chain, told one media outlet that his company has canceled contracts with 10 new shopping malls. ‘People are going bankrupt one after another, and this is going to continue,’ he said. According to Abdullah Kigili, owner of a long-established clothing brand, the party is over for the shopping malls. ‘The period of joyous, abundant business is over,’ he said.”

“Anxious vendors are turning to social media as well as traditional listings websites in the hope of selling their homes as the housing market softens. Off-the-plan resale apartments and suburban houses are being listed with labels of ­’urgent’ and ‘huge discount,’ particularly in Melbourne and Brisbane where concerns have been raised over the volume of apartment supply. The listings come amid a regulatory clampdown on investor lending aimed at cooling housing prices while the Reserve Bank ­recently again singled out the Brisbane apartment market as cranes dot the skyline.”

“Brisbane listings on the website include a Bowen Hills apartment ‘lower than original contract price’ and ‘totally negotiable’ along with house and land packages. Even in the heated Sydney market, a ‘charming’ Bankstown two-bedroom ‘needs to be sold ASAP.’”

“In the hopes of avoiding hefty agent commissions while still ­attracting buyers, Melbourne-based accounting and finance graduate Wenhai Zhang has listed an apartment for off-the-plan resale on Gumtree. He is helping to find a buyer for his friend who moved from China to study in Australia and bought the home, then found it difficult to get finance after ­restrictions on lending to offshore buyers were introduced. Other Chinese buyers are in a similar position and trying to sell their apartments, he told The Weekend Australian.”

“‘I did contact some Chinese agents, so they have a lot of apartments off the plan on their hands,’ said the 23-year-old, who is also from China.”

“Act Party leader and Epsom MP David Seymour says he can’t afford to buy his house in Auckland. Seymour earns about $190,000 a year as an MP (plus benefits). When asked if he didn’t think his statement was offensive to New Zealanders who are truly struggling, he said it wasn’t offensive because ‘it’s actually true.’”

“‘I rent a house with a couple of flatmates that cost $2.2 million last time it sold.’ Seymour points out that $2.2 million is ‘10 times’ his income. ‘The money I get after tax would give me $1000 a year left over after I paid the mortgage. That’s not enough for the rates.’ The interviewer pointed out that maybe Seymour just had his heart set on a ‘really expensive house.’ ‘It makes the point, doesn’t it?’ Seymour replied. ‘If someone earning $190k is having trouble, then clearly the market is stuffed for everybody.’”

September 21, 2017

When You Can’t Fill Units, The Price Has To Drop

A report from City Lab. “If renters paid just what they could afford in rent, the average household would have $6,200 a year more in their pocket to spend on groceries, childcare, medical care, and education—things one in five households have been skimping on to make rent. Collectively, that would amount to $124 billion that can help fuel economic growth.”

“These estimates of the 100 most populous U.S. cities come from a new analysis by the National Equity Atlas—a joint project by PolicyLink and the USC Program for Environmental and Regional Equity. ‘Renters are the lifeblood of cities,’ said Angela Glover Blackwell, CEO of PolicyLink. ‘If rents were affordable, renters could meet their basic needs like transportation, food, and child care and contribute even more to thriving communities. This would have a positive ripple effect throughout their regions.’”

The Mercury News in California. “The Bay Area’s brutal spikes in home prices have spurred more than half of its residents to dream of escaping from the expensive region, and the urge to flee is strongest among millennials, according to new poll results. The new Berkeley Institute of Governmental Studies Poll determined that 65 percent of the Bay Area’s registered voters and 48 percent of voters in California describe the issue of housing affordability as an ‘extremely serious’ problem.”

“‘The only folks who are cheering our region’s astronomical housing costs are the folks at U-Haul who are helping residents move right out of the state,’ said Carl Guardino, president of the Silicon Valley Leadership Group.”

The Salt Lake Tribune in Utah. “Real estate agent Kip Paul gets the question all the time: ‘Are apartments being overbuilt?’ With all the big apartment buildings going up in downtown Salt Lake City and Sugar House, it seems like a logical concern. Governments around the Salt Lake Valley issued 4,500 permits for new apartment units in 2016, the most since 1984. As of July, nearly 6,600 units were under construction in 35 complexes, and another 6,400 were in various stages of approval.”

“This scenario is good for owners of apartments and the contractors who build them, Paul said. As for renters, ‘if you can afford that top-line project, and you want something new and contemporary and are willing to pay for it, there are a lot of fantastic choices in Salt Lake with amenities you can’t believe,’ he said. ‘But if you’re a moderate or low-income person, these rising rents are hurting you.’”

“Because of the high demand, only 22 percent of the apartment communities surveyed by Cushman & Wakefield were offering incentives to entice people to sign leases. But more could be in the offing. With 13,000 apartment units projected to hit the market in the next four years, the report said, “the supply of new rental units could exceed demand by as much as 1,000 units by 2020 … which could result in a vacancy rate near 6 percent by year-end 2018.”

From AZ Big Media in Arizona. “Arizona’s housing market is getting more competitive leaving those at the lower end of the market struggling to compete, and many developers opting to build luxury homes and projects instead. Rental housing may be the next housing bubble to burst. ‘The problem is in renting, because people do not go through the underwriting process like they do when they are applying for a mortgage loan,’ said Mark Stapp, a real estate professor at Arizona State University’s W.P. Carey School of Business. ‘This leads to people getting in over their heads with rents they cannot afford.’”

“Landlords may be realizing they have outpriced many tenants, Stapp said. ‘When you can’t fill units, the price of rent has to drop,’ Stapp said.”

From Montana Kaimin. “One thing comes to mind when thinking of college houses and dorm rooms: Luxury. Affordability is of little concern to students at UM. More than half of renters spend over 30 percent of their income on housing, which the Missoula Organization of Realtors considers an ‘inadvisable’ amount. But since when were college students considered advisable?”

“But do not fear. If budget cuts force you to drop out, you can still live at ROAM, despite being touted unexceptionally across its website as student housing. According to the site’s frequently asked question of ‘Do I have to be a student to live here?,’ the answer is simply, ‘No, you do not.’ So don’t sign any extended leases on that overpriced shit hole you’re in now, because this time next year you could be the proud new tenant of a private, luxury, student (not limited to students) housing unit.”

The Daily Illini in Illinois. “Just last semester we celebrated a big anniversary for our University; it’s been 150 years of truly impacting the two cities which we span. With this in mind, realize how many ‘luxury’ student housing complexes have opened in the last decade. This summer, two new ‘luxury’ apartments were completed in time for Fall 2017 move-in, both within a block of each other.”

“But many are planned and operated by the same realtors, doing the most to make sure your money is in their pockets — even if that means using questionable construction practices to make sure their properties are built as quickly as possible before the next ‘hot property’ comes along. I am not calling out HERE apartments, but then again, their elevators never work and last year the elevator inspection sheets hung up were months out-of-date.”

“In fact, the ‘luxury’ apartment buildings are housing so many students that it is leaving many houses in ’senior land’ and Urbana vacant. The vacant houses in these areas go down in rent. Of course, I enjoy the amazing view, staring right at another apartment building through my window (ha). But I know I will do my best to convince my friends to live with me in a cute Champaign house next year because, if anything, I am never waiting 13 minutes (I timed it once) for an elevator at 8:00 a.m. on this campus ever again.”

From Bisnow on Illinois. “Conventional wisdom dictates the multifamily construction boom in Chicago will not last forever. So do the numbers: over 12,000 new apartments are being added to downtown Chicago’s inventory through 2019. A tipping point may be near in this development cycle. Fifield Cos. CEO Steve Fifield compared the growing confluence of factors to the apartment boom of the 1970s and ’80s. Developers believed that boom period would go on forever, but then the Cook County Assessor reclassified apartment complexes as commercial properties, which sent real estate tax bills skyrocketing 2.5 times overnight. ‘We’re taking for granted that this period will continue,’ Fifield said.”

“The problem is that those rent increases get passed down to tenants, who are already struggling to pay their monthly notes. Another indicator that a reckoning is coming is in the percentage of renewed leases. Fifield said retention rates at his firm’s apartments last winter fell for the first time in five years. Golub Executive Vice President Lee Golub said that with abatements on new lease-ups, like one month free rent, apartments have become a transient business for the renter. Golub has seen retention rates decline at some of his firm’s developments over the past two years, and said sometimes 35% to 45% renewal rates are seen as strong. With a growing inventory of new apartments, renters have opportunities to seek out favorable abatements to keep their costs down, and shop the market. ‘A real renter does not care where they are,’ Golub said.”

“JRG Capital Partners principal Harry Huzenis said the length of the development cycle and changes to the ARO are negatively affecting land pricing. He believes Chicago is in the late innings of the cycle, judging from the number of apartments in the pipeline, flat downtown rent increases, and vacancies in submarkets where there were waiting lists a couple of years ago. ‘You cannot get bigger units rented,’ Huzenis said.”

The Milwaukee Business Times in Wisconsin. “It was surprising to hear the recent announcement that Bartolotta Restaurant Group will end its partnership with Phoenix Hospitality Group for four restaurants at The Mayfair Collection development in Wauwatosa. The first of those restaurants, Osgood’s, opened less than two years ago. The move raises an interesting question. After several years of a boom of new restaurants in the Milwaukee area, is the market now oversaturated? Several new restaurants have opened in the area in recent years, and a slew of additional new restaurants are on the way.”

“Speaking of closures, Associated Banc-Corp recently revealed that 36 bank branches will be closed and their operations consolidated with nearby branches in its acquisition of Bank Mutual Corp. Brick-and-mortar branches are becoming a smaller part of the banking business. So who is going to make use of the 15 vacated branch buildings? It is going to be hard to find banks to absorb all of them. Restaurants are another option but, again, how many more of them can the market support?”

“Another sector showing signs of oversupply in the area: hotels. Several new hotels have been built in recent years downtown and in the suburbs, and more are under construction or being planned. Occupancy rates have dipped this year. Case in point, the Park East Hotel near downtown Milwaukee was recently sold to developers who plan to convert it into an apartment building. But apartments are another sector that has been built up in recent years, especially downtown. Two of the area’s largest multi-family apartment developers have indicated they are tapping the brakes on additional downtown projects, for now.”

September 20, 2017

At The Same Time, There’s A Shortage And Overabundance

A report from Mortgage Orb. “There’s been a lot of speculation in the mortgage industry lately about how hurricanes Harvey and Irma might effect delinquencies and defaults in Texas and Florida – not to mention mortgage originations and home sales. A high percentage of the homes in the area were already underwater in terms of loan-to-value. A report from ATTOM Data Solutions shows that the rate of foreclosure was on the rise in the Houston area before Harvey even hit. According to the firm’s Foreclosure Market Report, foreclosure starts in the Houston area had increased 28%, year over year, as of August. During that period, nearly 5,000 Houston-area homes started the foreclosure process, according to the report.”

“States that saw year-over-year increases in foreclosure activity in August included Alaska (up 100%); Wyoming (up 79%); DC (up 67%); Louisiana (up 59%); Vermont (up 12%); and Mississippi (up 9%). ‘The 14 percent month-over-month increase nationwide this August is more than twice the average six percent seasonal increase in August over the previous 10 years – the highest in fact since a 37 percent month-over-month increase in August 2007,’ says Daren Blomquist, senior vice president at ATTOM Data Solutions. ‘While this seasonal increase is certainly not enough to set off alarm bells nationwide, especially given that foreclosure activity was down annually for the 23rd consecutive month in August, there is cause for concern in a few local markets where foreclosure activity has consistently been trending higher on an annual basis this year.’”

The Star Tribune in Minnesota. “The market always slows at the end of summer, but there are some complications this year. The most important is the ongoing shortage of entry-level priced houses to satisfy demand. At the same time, there’s an overabundance of upper-bracket houses on the market. ‘The well-priced and staged homes may sell in days while homes that are not may languish on the market for 100-plus days,’ said Kath Hammerseng, president-elect of MAAR. She said that, despite some indications that sellers are in the driver’s seat, the market feels more balanced than the numbers suggest. ­’Neither buyers nor sellers are getting everything they want.’”

From Fox 40 in California. “An economic slowdown could be on the horizon for the Sacramento region, according to a new economic report from Sacramento State. The report’s author, Sacramento State economy professor Sanjay Varshney, said the post-recession recovery could be entering its later stages. ‘If the data stays persistent, what I mean by that is if truly the weakness sets in, this might be the first signs of a recession down the road,’ Varshney said.”

“The most recent midyear report showed one critical industry slowing down in the Central Valley. ‘We saw the goods producing sector, the non-service sector, actually go negative,’ Varshney said. Also troubling, Varshney said construction jobs, one of the biggest drivers of the labor market in the region, for the first time in 7 years went negative. ‘When the construction sector goes negative for the first time in 7 years, it does get our attention,’ the professor said.”

The New York Post. “While a disgraced Nigerian oil-trading billionaire is on the run from authorities, his posh West 57th Street pad is back on the market — at the wholesale price of $39 million. Kola Aluko bought the sprawling 79th floor penthouse for $51.9 million in 2014 — but owed taxes and lenders. ‘The home was in foreclosure, but it is now being sold by a third party as an alternative to foreclosure,” said a source close to the property.”

“‘MOTIVATED SELLER!!!’ notes the listing. ‘A once in a lifetime investment opportunity to purchase the last remaining full floor residence at Manhattan’s New Crown Jewel, One 57 Condominium, for a great value!’”

“Aluko, who is under investigation for alleged money-laundering crimes in Nigeria and Europe, couldn’t be reached for comment. A Nigerian court tried to freeze his assets, including the penthouse, in 2014 — but couldn’t find him to serve papers. While One57 is home to the city’s first and only $100 million condo sale, it never sold out.”

“This is the second financially troubled unit in the building to have been slated for foreclosure. As global law enforcement catches up with more folks from foreign countries who allegedly laundered their ill-gotten gains by scooping up homes for cash in New York City trophy buildings, more foreclosures may be on the way, real-estate experts tell the Post.”

From 6sqft in New York. “New Yorkers know that taking on a mortgage in the city is no easy feat. But a recent map shows that, compared to the rest of the country, we’ll spend many more years than most everyone else (except San Franciscans) in our attempts to pay it off. This map, which measures ‘mortgage magnitude,’ looked at the median local income and median local home value to show the relative affordability of property in each US county. The value of the average property was then expressed in the number of years salary it costs.”

“In some counties, a house will only set you back a total of one year’s pay. But as you move out toward coastal cities like New York, that number gets dramatically higher. The income to housing ratio starts to get pricer in Hawaii, much of California, the scenic portions of Colorado, and some metropolitan counties in the east. Buying here will take between six and eight years.”

“Now we’re hitting the ten year mark—homes that will take a full decade of income to pull off. Many areas of coastal California, including Los Angeles, as well as the island of Nantucket are included here. And New York City makes its first appearance, with the inclusion of Queens County. ‘Many of the scattered counties are characterized by costly vacation homes far out of reach of the resident population,’ according to the mapper.”

“Here’s the moment New Yorkers on the hunt for an affordable home have dreaded—we have now surpassed the 1:10 ratio of mortgage magnitude, the end of the line. The median home in these counties costs up to 13 solid years of income, and the counties that comprise New York City make this list. New York is joined by its expensive west coast counterpart, San Francisco County. The other places that these two insanely expensive cities? San Juan, Washington, Teton County, Wyoming (comprised of Jackson Hole and much of Yellowstone), and Dukes County, Massachusetts, aka the island of Martha’s Vineyard.”

September 19, 2017

It Was Gruesome Watching People Not Make Much Money

A report from the Washington Post. “London: They are not hard to spot, if you know where to look, especially at night - the floors of swanky, new apartments, most of the windows dark, almost all the time. The zombie flats. Owned, but empty. There’s enough empty property here to be given a name in the British news media: the ‘ghost mansions’ of ‘lights-out London,’ the streets where it is alleged that 7 in 10 addresses are second - or third or fourth - homes. The blight of conspicuous empty homeownership is a big story in London - and around the globe. The ‘empty home’ phenomenon has gone viral in hot postal codes around the world - and it is especially visible in cities such as Miami, Hong Kong, Vancouver, B.C., Dubai, Singapore, San Francisco and Sydney, where foreign buyers and their shell companies gobble up units as investment properties and piggy banks.”

“In Manhattan, the New Yorker had a look at Census Bureau numbers, which revealed that in midtown - from 49th to 70th streets, between Fifth and Park avenues - nearly 1 in 3 residences are unoccupied at least 10 months a year. Newsweek estimated in Paris ‘one apartment in four sits empty most of the time.’ In Jerusalem, the deputy mayor said the number of ghost flats is triple the official estimate - and bemoaned the impact on young families searching for a bit of living space.”

From Better Dwellings in Canada. “Toronto real estate inventory has been increasing over the past few months, and we wanted to see what kind of sellers we’re looking at. An analysis of properties listed for sale in the City of Toronto show that over 6% were bought less than 18 months ago. While some have ask prices that might prove profitable, we estimate 1 in 3 of these listings are currently looking at a loss.”

From Bloomberg/Dubai. “Dubai residential property prices and rents are set to fall further as losses of high-paying jobs and dwindling household incomes boost vacancies across the city, according to Phidar Advisory. ‘The false start of early 2017 is over and the cracks are starting to show,’ Jesse Downs, managing director at Phidar, an advisory firm specialising in real estate, wrote in a report. ‘Sales volumes of completed properties are at a six-year low and vacancies are rising across the city.’”

The Vanguard in Nigeria. “In spite of the cheering news that the country is getting out of economic recession, the bleak outlook of the housing sector of the nation’s economy will remain a major cause for concern for real estate developers and the survival of their businesses in the country. This is because developers have been churning out housing units in different parts of the country without corresponding demand for them. This has subsequently led to the astronomical increase in the number of unsold housing units across Nigeria.”

From Reuters on Brazil. “A Brazilian land developer controlled by U.S. buyout firm Carlyle Group LP investment vehicles has appointed turnaround specialist Ivix Value Creation to help it reverse mounting client lawsuits and avoid filing for bankruptcy protection. The move is intended to help Urbplan find a way to avoid restructuring a pool of asset-backed securities and credit worth 450 million reais ($144 million) and recover from a period of weak housing activity, they said.”

“Their first task, they told Reuters, will be reviving confidence among creditors that Urbplan will repay them. ‘We are not here to carry out an autopsy of the company, which means we’ll do whatever it takes to avert Urbplan’s bankruptcy protection,’ said partner Nelson Bastos.”

From The Australian. “Mortgage belt suburbs in western Sydney are starting to show signs of stress, topping a list of areas across the state where homeowners are having the most difficulty keeping up with their loan repayments as the housing boom starts to slow. The worst performing postcode in NSW is Ashcroft, 29km southwest of Sydney’s CBD, according to a ranking by ratings agency Moody’s of suburbs where homeowners are more than 30 days behind in their mortgage payments.”

“Carnes Hill in the city’s southwest was ranked third, Fairfield was eighth and Bidwill in Sydney’s northwest was ninth. The ranking follows a five-year bull run in the housing markets of Australia’s east coast capitals, where dwelling prices had soared on average about 80 per cent in Sydney, according to CoreLogic.”

“The western Sydney mortgage belt suburbs were home to a noticeable proportion of first-home buyers who often bought in house and land communities being developed in the city’s growth corridors, said Savills Australia head of residential research Sophie Chick. ‘You’re seeing people moving into new homes so you don’t have that existing equity. So when you have a look at the distribution of people there (in these new communities) they’re all new buyers to the area, so they’re more likely to be taking out mortgages,’ Ms Chick said.”

Fromm Stuff New Zealand. “Former Block Australia contestant Carlene Duffy, who walked away with just $10,000 from her auction, said it will take the losing Block NZ contestants ‘months to get over the shock and devastation’ of falling short at auction. ‘I would just give it time, because it probably took us a few months,’ Duffy said. ‘This whole experience, you sort of feel like you are in a bubble and it’s very insular, but if give yourself time and once the shock wears off, you can re-evaluate where you go from here.’”

“Carlene and her husband Michael Duffy were fan favourites of The Block Australia’s 2014 ‘Glasshouse’ season, which saw an abandoned 1980s office building transformed into multi-million dollar apartments, but were gutted when 14 weeks of renovations yielded them just $10,000 at auction.”

From The Spinoff. “For the last six years The Block NZ has been both New Zealand’s most successful reality franchise, and the most illuminating cultural artefact of this era. The show features four teams racing to complete a renovation or build of adjacent houses, with each retaining the profit from the sale, while those who get the largest profit also get a $100,000 cash prize.”

“For five years the show rode the surging Auckland housing market ever higher. Back in 2012 houses in bourgie Takapuna went for between $789,000 and $961,000 – figures which seem almost quaint today. Gradually the median lifted: it was $983,000 the following year, rocketing to $1,429,000 on moving to Pt Chev in 2014, before posting $1,327,500 and $1,425,000 in Sandringham and Meadowbank respectively.”

“Every year the show’s contestants profits grew a little fatter, rising like the market from a little over $300,000 combined in year one to peak last year with the four teams splitting a Lotto-like $1,081,000. And, for mystifying reasons which can be known only to the contestants, Mediaworks, the IRD and our legislators, all that money was tax-free.”

“Which is to say that The Block NZ functioned as a perfect advertisement for our housing market: vastly expensive but only going up; everyone made tonnes of money; no one paid tax. Truly, this reality TV captured our era better than any big budget drama could ever dream of doing. Until, last night, it all broke down. We’ve been told the market will crash or stall since before 2012, but last night we watched it happen on live TV. It was gruesome viewing. Auctioneers in bright yellow ties, coated in sweat looking out at motionless audiences. We watched three-part tragedies unfolding before our eyes.”

“It was wrenching television, watching ‘people not make much money,’ as host Shelley Ferguson put it, and no one on screen was in any mood to celebrate. Worse than the timing was the constant push to bigger and bigger houses, which mirrors that of the market as a whole. Our house-size has risen over the past few decades from around 100sqm to closer to 200sqm. But the bigger and richer they are, the less liquid, as we saw last night.”