The Lack Of Skin In The Game
A report from CNBC. “It will come as no surprise to anyone out house hunting today — buying a home is becoming ever more difficult to afford. Prices just keep soaring while incomes fail to keep pace. Even historically low mortgage rates are not helping enough. At the end of July, of the top 50 markets, based on housing stock, 46 percent were overvalued, according to CoreLogic. Home sales have been weakening throughout the summer, as demand far outpaces supply and affordability weakens. Redfin reported 35 percent more requests for home tours in July, compared with July 2016. It also, however, reported that the number of offers dropped 11 percent.”
“‘Buyer demand has been stronger so far in 2017 than last year, but the combination of low inventory and rising home prices is taking its toll heading into the fall,’ said Nela Richardson, chief economist at Redfin. ‘Sellers are still in control of the market, but their advantage is narrowing as buyers are becoming less willing or able to chase escalating prices.’”
The Union Tribune in California. “A mortgage that is as close to zero out of pocket as one can get is available in San Diego County from a Utah-based Native American tribal corporation. Aimed at low-income buyers, the Chenoa Fund has looser requirements than many down payment assistance programs. Michael Whipple, vice president of Chenoa Fund, said the fund is different from so-called ‘liar loans’ popular before the recession. ‘There’s a need out there in the marketplace,’ he said. ‘People confuse down payment assistance with some of the easy credit that was available (in the housing crash). This kind of financing isn’t what caused the meltdown.’”
“Mark Goldman, a loan officer and real estate lecturer at San Diego State University, said he understands the lack of ’skin in the game’ argument for low down payment options but that it might be the only path to homeownership for some. ‘Anything that helps people come up with the down payment is useful to a lot of families,’ he said. ‘I think it creates additional risk when someone purchases a home with no skin in the game. But, should it be required every time? No.’”
The Naples Daily News in Florida. “Broker analysts reviewing the July 2017 Market Report released by the Naples Area Board of Realtors (NABOR), which tracks home listings and sales within Collier County (excluding Marco Island), said a 9 percent increase in closed sales during July was very good. ‘The median closed price went down 16 percent for condos in this $500,000 to $1 million price category. I believe this is a reflection of smart pricing strategies finally taking hold,’ said Kathy Zorn, broker/owner, Better Homes and Gardens Real Estate Pristine.”
“For months, broker analysts and NABOR have warned against setting unrealistic pricing, a strategy that Dominic Pallini, NABOR President and Broker at Vanderbilt Realty, said can ‘hurt a homebuyer because a home is often overlooked if it’s overpriced.’”
The Post and Courier. “According to North Carolina mountain agents, the time’s ripe to make a purchase as prices continue to lag from the late 2000s recession and housing slide and sales are also slower than typical. ‘The number of transactions is not like 10 years ago,’ says Philip Borneman, sales associate with Premier Sotheby’s International Realty in Blowing Rock, North Carolina. ‘It’s a good buying opportunity,’ he says.”
“Jennifer Merrell, broker with Steve Owen & Associates. acknowledges that ‘inventory is certainly down’ but that hasn’t boosted values. ‘It’s still a buyers’ market,’ says Merrell, who reduced the price to $549,500 on a well-placed house within walking distance of downtown Brevard, North Carolina. Meanwhile, new construction has picked up speed. While new homes cost up to $300 a square foot, builders are available and can sometimes raise houses at lower prices than existing properties. As a result, Merrell says, ‘I’ve sold a lot of people land.’”
The Sidney Herald in Montana. “With more than 100 houses on the market in Sidney, the community is experiencing a record total of availability. ‘This is historically a high amount for us,’ Leif Anderson, owner of Beagle Properties, said of the houses for sale in the community. ‘When demand is high, prices go up and inventory is down,’ Anderson said. But the opposite has occurred starting in 2015. ‘When the demand declines, inventory goes up and prices go down,’ he noted.”
“He says that prices for ‘entry-level homes’ have dropped dramatically. Prices for ‘mid-range homes’ are decreasing but not as dramatically. ‘Prices aren’t going down as quickly as they went up.’ Homes on the high end, $300,000 or above, aren’t seeing much of a change. He said some sellers are facing challenges when they purchased a home during the oil boom and now are needing to sell the same house for a reduced price. Anderson said there have been more short sales, foreclosures and deeds in lieu than in the past.”
“He’s hopeful the market will turn around fairly soon, but he doesn’t have any predictions. ‘I’ve never felt less sure of what the housing market will do than I do now,’ Anderson said.”
From NY 1 in New York. “Across the city, rising rents are forcing businesses large and small to close. That’s a longstanding problem in New York, but what’s different now is that in many cases once those shops close the space remains vacant for months or years, NY1’s Michael Scotto reports. Average retail rents in key Manhattan corridors soared 90 percent from 2010 to 2014. This, as many businesses saw customers desert them for online retailers. Natasha Amott runs a kitchen supply shop near the Flatiron Building. Customers make no secret of comparison shopping online.”
“‘We’ve definitely had a lot of people come through, definitely look at the pricing, ask about, ‘Well, Amazon is charging this, can you match that?’ But we’re not always able to; in many cases, Amazon is charging below the minimum advertised price,’ Amott said.”
“For many retailers - even chain and luxury brands - the double whammy of rising rents and Internet competition is too much to bear. The commercial real estate firm CBRE says Manhattan’s major retail corridors had 203 empty storefronts at the end of the June, one third more than a year ago. Along Broadway, Third Avenue, Madison Avenue, Bleecker Street, and the streets of SoHo, for rent signs are everywhere.”
“‘Bleecker Street represents the problem of high-rent blight, which is where businesses are forced out by landlords who look for the next big thing and then the next big thing doesn’t pan out, and often these storefronts remain vacant for years as a result,’ said State Senator Brad Hoylman.”
“Analysts say landlords who have owned buildings for decades have low carrying costs and can afford to wait for high-paying tenants. Then there are new building owners who bought at the height of the market, with borrowed money. Those loans guarantee a certain rental income. Without that income, the underlying value of the property falls. ‘Landlords are faced with the prospect that if they accept lower rent then they might face a situation where they might go into default with their lender or be asked to put more capital in, and so they’re trying to avoid that by just holding out until they find a deal that meets their terms,’ said Nicole LaRusso of CBRE.”
“When Jimmy Vezyrakis opened his pizza shop in 1981, everything fell into place. ‘I created a life. I had my family. I bought a home,’ Vezyrakis said. Thirty-six years later, the pizza-man says his life is falling apart. He says he shut his Caesar’s Palace Pizza shop on Amsterdam Avenue near 84th Street this summer because his rent soared to more than $16,000 a month, a staggering hike of nearly 80 percent. ‘I was living the American dream, and just one day, someone came out and pulled the carpet out of my feet,’ Vezyrakis said.”
“With college tuition for two kids, he’s now driving for Uber - earning only a third of his previous income. ‘I thought I was going to sign a decent lease and continue going. Like I said, I wanted to retire there,’ he added. That space is still vacant, though, another store gone to high rent.”
