October 25, 2017

A Real Concern The Market Will Be Oversaturated

A report from the Austin Monitor in Texas. “Realtor Barrett Raven said he isn’t feeling the effects of a recent change playing out in the Austin area. Compared to this time last year, foreclosures in the Austin-Round Rock metro area have increased by 29 percent, according to a report out this month from the California-based research firm ATTOM Data Solutions. The group’s senior vice president, Daren Blomquist, explained. ‘This isn’t another crisis, so to speak, but we are seeing some loosening of credit that is introducing more risk, and there is this increase in the number of people falling into foreclosure,’ Blomquist said.”

“The report also notes a spike in a certain type of foreclosure – what’s known as a Federal Housing Administration loan. ATTOM says Austin is seeing an ‘11-year high’ in FHA foreclosures stemming from loans taken out in 2014. Doug Scott, a mortgage banker of over 30 years, explained that FHA loans are a government-guaranteed mortgage. The federal program was initiated in the 1930s. ‘It’s morphed over time into its present form today, where it is really designed to help first-time homebuyers get into their first home, with a relatively small amount of a down payment,’ Scott said. ‘Right now, the minimum down payment is 3.5 percent of the purchase price.’”

From the Urban Land Institute on California. “As ULI opened its 2017 Fall Meeting in Los Angeles, Robert Lowe, chairman and founder of Lowe Enterprises and the conference’s cochair, told attendees that the Los Angeles of today is much different than the L.A. that hosted ULI six years ago. Central Los Angeles is one of the hottest markets in the United States, with prices soaring, international capital flowing to projects, and more than a dozen developments under construction downtown.”

“But the panel also sounded a few cautionary notes. With so many residential towers in development, there is a real concern that the market will soon be oversaturated with luxury condominiums, panelists agreed. ‘I think there is going to be an oversupply that will take a few years to absorb at the higher end,’ Lowe said.”

“For AEG, which developed L.A. Live, the entertainment center, there is apprehension that the new projects will not generate the foot traffic necessary to support the new businesses moving into the area, said Ted Tanner, senior vice president of real estate. ‘It’s pretty scary in terms of the oversupply,’ Tanner said. ‘The big fear is that [the new condos] will sit mostly empty.’”

The Mercury News in California. “Pending home sales fell markedly across California in September, with the largest regional drop-off in the Bay Area where an ongoing housing shortage and exorbitant prices appeared to dissuade some potential buyers. That’s according to a new survey by the California Association of Realtors, which examines pending sales as a bellwether for where the housing market is headed. It didn’t provide data on closed home sales.”

“Statewide, the number of pending sales fell 6 percent on a year-over-year basis in September, while they fell 10.8 percent across the Bay Area. Locally, pending sales were down even more dramatically, falling 23.5 percent in Santa Clara County compared to September 2016 and 22.4 percent in San Mateo County.”

The Flathead Beacon in Montana. “In 2017 the overall median price of sold residential properties in Flathead County is currently $275,000. As we move up into the $1 million to $2 million dollar range, we find that this price range only accounts for 2 percent of the sales, but 14 percent of the current listings are in this price range. With only 30 sales in the last year and 147 current listings, this tells us that there is currently around 59 months of inventory of homes in the $1 million to $2 million dollar range. This segment of the market continues to be a buyer’s market.”

“For homes priced over $400,000, there is currently 18.2 months of inventory, putting these higher priced homes in a buyer’s market. The market is generally quite smart and pricing is key to getting homes sold. This is especially true in the higher price ranges because there are a lot of sellers competing for a relative few number of buyers.”

The Star Ledger in New Jersey. “It didn’t come until the 35th minute of the second gubernatorial debate, but each of the candidates finally uttered the words affordable housing and state planning. Admittedly, housing issues rarely ascend to the top of the platform for either statewide or national office, but whether you know it or not, New Jersey is in the middle of a housing crisis.”

“New Jersey is a wealthy state, ranking fourth in the nation in terms of median household income. But according to the National Low Income Housing Coalition, New Jersey ranks as the 7th most expensive state in the nation in terms of housing cost. So it’s expensive to be poor in New Jersey.”

“According to the American Community Survey, there are 3,577,942 housing units in New Jersey; 388,456 of which are recorded as vacant. That’s nearly 11 percent of the total housing stock. Adding insult to injury, New Jersey ranks second in the number of residential foreclosures in the country, with more than 72,000 housing units that are under some form of a foreclosure. Bottom line: there’s an incredible shadow inventory of homes that hangs over our state.”